Profit Sharing Plan - Sole Proprietor to LLC

[Guest tgraham]

Do we need a new profit sharing plan document for the LLC that has replaced the proprietorship? We have a new EIN, of course, but am not sure if we need to terminate the old plan and "start" a new plan? Any help would be greatly appreciated. Thanks.

[Blinky the 3-eyed Fish]

All you need to do is prepare an amendment to the plan which has the new entity replace the old as the plan sponsor. At that time you can change the plan name as well, if needed. On Form 5500, there is a place to mark the change in sponsorship from one entity to another.

[Mike Preston]

Have the new entity adopt the plan. That should do it. There is usually a provision in the plan for "adopting employers". You want the new entity to be an "adopting employer", so follow what the plan says to do.

If the old entity is going away, you probably want to adopt something that acknowledges the replacement of the old entity with the new entity as the Plan Sponsor (as opposed to merely having the new entity be an "adopting employer").