Sole Proprietorship to Adopt 2011 SEP by Oct 15, 2012

[Richard Anderson]

Background:

For first half of 2011 entity was sole-proprietorship. Incorporated for last half of 2011.

Question: Is there any reason why the sole-proprietorship can't adopt a SEP for the 2011

year, based on the earned income of the Sole- proprietor for the first half of 2011?

Adoption to take place between now and 10/15/12.

Once the company incorporated in last half of 2011, no further income was generated or services

rendered to the sole-proprietorship. Did the sole-proprietorship cease to exist when the company was

incorporated in 2011, therefore is unable to adopt in 2012?

If it makes any difference, once incorporated, no further services were performed for the sole-proprietorship,

neither in 2011, nor in 2012.

When does a sole-proprietorship cease to exist?

[Gary Lesser]

It does not appear a sole-proprietorship ever ceases to exist while the owner is alive. Thus, there are controlled group issues to consider in the adoption.

From your facts, it would appear that the CY entities are on extension for 2011. A net loss from self-employment (if any) would not reduce plan compensation (if any, from corporation). Hope this helps.

[Richard Anderson]

It is too late (after 9/15) for the corp to adopt a SEP for 2011.

It is not too late for a self employed entity to adopt for for 2011.

The SEP would use only earned income from the Sole-proprietorship for the

2011 contribution.

[Gary Lesser]

Interesting facts. If the corporation has any other employees that would be eligible, THEN there would be a problem.