LLC with possible SEP qualification issues

[Guest nipa]

A LLC establised a SEP in 2002. The LLC file their taxes as a partnership and all "wages" are earned income (K-1). Now for the questions. First, the 2 members, who are the only employees, set up individual SEP's using their individual information not under the LLC's name/tax number etc.. Does this make the contributions made in 2002 disqualified? The SEP should also have uniform contribution amounts as a percentage of compensation, but the 2 members contributed different amounts As both are HCE and key , does this cause any discrimination issues or any other problems I should be aware of? Thanks in advance for any input!!

[Gary Lesser]

Neither of the SEPs qualify as a plan for the partnership because the partnership has adopted no plan.

If the individuals are also sole proprietors, they may each have a SEP that covers their earned income from their sole-proprietorship. The partnership income may not be considered unless they are part a controlled/related/affilliated group. If so, then none of the plans are valid since they were not adopted by the partnership.

The unequal contributions are also a problem but only apply to a plan; a plan that doesn't seem to exist. I bet there are some nonowner employees too, somewhere(?).

Hope this helps.