LLC Members in a 401k PLan

[Alex Daisy]

Am I correct to say that in order for LLC Partners in a company to contribute to a 401(k) Plan they must have earned income on their K-1?

Eleven employees invested money into our company and therefore changed their status from employee to LLC member. Those members now rather than getting a salary or income from the company are receiving guaranteed payments. Rather than receiving W-2’s they will receive K-1’s. The company will have a net loss this year so on their K-1’s for this year they will show their portion of the companies loss (which will be nominal) and it will also have their guaranteed payments. Just to be clear the guaranteed payments will far exceed the apportioned company loss on their K-1’s.

All this being said I just wanted to confirm that it is okay for both the employees as well as the LLC members to participate in the 401K plan.

There will be no profit though as the company will lose money this year. Is their Guaranteed Payments considered profit?