Schedule C to LLC - SEP *AND* Solo(k)?

[Leopurrd]

Here is the situation:

You currently have Schedule C income, sponsor a SEP plan and contribute 42000 for the year to it (sole proprietor - income substantiates contribution).

Now, you form an LLC (still single member) and are advised by a bank that you can open a Solo(k) and contribute another 42000 to this plan.

Is this correct? Referencing section 415, it limits the annual contribution to 42000 for all plans the "employer" sponsors during the year. Perhaps this is a situation of "who's the employer" where the LLC that is formed is considered a new employer, thus making the second maximum contribution possible?

(I'm thinking no - just a change in entity, not employer).

Your thoughts (and code references) are appreciated!

*Note - the LLC and Sole Proprietorship offer the same services.

[R. Butler]

I'm a little confused about whether there are 2 separate business or just a change in form from sole proprieter to LLC, but I don't see that matters. Even if there are 2 separate businesses both would be treated as one employer for the 415 limits.

[Leopurrd]

Thanks for the post; I was thinking the same way.

Vicki

[Belgarath]

Yes, and if the employer is a "prove it to me" sort, then you can start with IRC 414 - which will, of course, lead you to other pertinent sections as well.

[E as in ERISA]

And while you generally aggregate all companies in which there is 80% common ownership, for 415 purposes you would aggregate with only 50% common ownership. (Although it sounds like 100% overlap to me).

[Earl]

isn't it "over 50%" rather than "only 50%"?

[Blinky the 3-eyed Fish]

Careful on the 50% rule. It applies to parent-subsidiary controlled groups only, not brother-sister.