Controlled/affiliated service group

[Guest Alexpi]

Company A owns 49% of Company B. Both are C corps. Company A currently has a 401(k) plan for employees. Company B is looking to start a 401(k) plan for it's two employees. Would this be considered a controlled or affiliated group?

Company B is a engineering service company that provides exclusive work for Company A. Company A's primary business is software but also provides services to Company B (legal, accounting, IT, HR, etc..)

Is there any way this would be considered a controlled or affiliated group?

Thank you!

[ETA Consulting LLC]

It looks like an Affiliated Service Group (at the very least, under the B-Org rules). Could be a Controlled Group depending on who owns the other 51% and the attribution rules applied to that ownership.

Good Luck!

[Guest Alexpi]

It looks like an Affiliated Service Group (at the very least, under the B-Org rules). Could be a Controlled Group depending on who owns the other 51% and the attribution rules applied to that ownership.

Good Luck!

Thanks for the input! The other 51% is owned by an employee of Company B (35%) and an ex-employee of Company B (16%). I'm guessing that makes us a controlled group?

[ETA Consulting LLC]

Thanks for the input! The other 51% is owned by an employee of Company B (35%) and an ex-employee of Company B (16%). I'm guessing that makes us a controlled group?

Not necessarily. Suppose the employee owning 35% and the ex-employee owning 16% both have rights of first refusal requiring them to sell their shares to Company A before attempting to sell them to someone else. This would create an attribution of that 51% to Company A; making them now own 100% (a Parent - Subsidiary Controlled Group). You'd never know until asking a "potentially" exhaustive series of questions designed to determine if attribution of shares exist. This is merely one of many questions.

Hope this helps.

[Guest Alexpi]

Thanks for the input! The other 51% is owned by an employee of Company B (35%) and an ex-employee of Company B (16%). I'm guessing that makes us a controlled group?

Not necessarily. Suppose the employee owning 35% and the ex-employee owning 16% both have rights of first refusal requiring them to sell their shares to Company A before attempting to sell them to someone else. This would create an attribution of that 51% to Company A; making them now own 100% (a Parent - Subsidiary Controlled Group). You'd never know until asking a "potentially" exhaustive series of questions designed to determine if attribution of shares exist. This is merely one of many questions.

Hope this helps.

I see...That makes sense. The 51% shareholders have to sell their shares back to Company B at the end of two years and Company A is under contract to purchase those shares from Company B (same date 2 years from now) to make the ownership 100%...There is a reason that Company A will not purchase the shares directly from Company B shareholders but I don't think the details of that will matter here. I knew that when the 100% purchase takes place we would be a controlled group but I was looking to see if we were not considered a control group until that date.

Thanks for all your help!