Self-Employed Sole Proprietorship & Partnership

[Gruegen]

An attorney has a sole-proprietorship for a portion of 2010. He establishes a SEP for his sole-proprietorship and contributes $49,000 to the SEP in 2010.

He also becomes an equity partner (self-employed individual) in a 50 partner law firm partnership. The law firm sponsors a top-heavy 401(k) profit sharing plan that he is eligible for in 2010, but makes no 401(k) contributions and receives no employer contributions in 2010. As a non-key employee with respect to the law firm qualified plan, he is entitled to a 3% top-heavy minimum contribution.

Do the contributions to the SEP and qualified plan need to be coordinated?

[Bill Presson]

An attorney has a sole-proprietorship for a portion of 2010. He establishes a SEP for his sole-proprietorship and contributes $49,000 to the SEP in 2010.

He also becomes an equity partner (self-employed individual) in a 50 partner law firm partnership. The law firm sponsors a top-heavy 401(k) profit sharing plan that he is eligible for in 2010, but makes no 401(k) contributions and receives no employer contributions in 2010. As a non-key employee with respect to the law firm qualified plan, he is entitled to a 3% top-heavy minimum contribution.

Do the contributions to the SEP and qualified plan need to be coordinated?

No, as long as it is not a controlled group. It's comparable to working for Ford and GM and getting contributions in both plans.

Just make sure his sole-prop compensation supports the deduction.

[Guest Sieve]

As long as it also is not an affiliated service group.

[Gary Lesser]

AND (and just in case). as long as owner's ownership in the partnership is 50% or less, Code Section 415(h) requiring aggregation for section 415 limitation purposes only, would not apply.

For example, and community property aside, if wife was majority owner (say 51%) of law firm then aggregation under Code Section 415 (only) would apply.

Hope this thread has helped.