Plan continuation when corp or partnership dissolves/splits

[Belgarath]

Just curious as to what others "typically" find that employers choose to do. Say you have a two owner corporation, or a two person partnership, and either the partners split to form their own separate businesses, or the corporation dissolves and both owners form new corporations.

It seems like it is rare for either person to do an assumption of liability and change over the plan to new employer name/id #. They typically just terminate the old plan and set up new plans.

I can see reasons why they would do this, but I just wondered if this is typical in your experience? Maybe the biggest factor is they just want a clean break with the prior business. Any thoughts on specific pros and cons that you have experienced?

[Kevin C]

We've had a few clients with multiple owners split their businesses. One of the "new" businesses generally adopts the old plan as a successor sponsor. I can't recall a instance where the plan was terminated under that situation. The biggest advantage is that it is much less work (i.e. much less expensive) to have them adopt an existing plan than it is to terminate one and then install a new plan.

When a client sells their business, it is more common to terminate the old plan and start a new one. Although sometimes the new owner will adopt the old plan as a successor sponsor.

[Belgarath]

Thanks Kevin. Yeah, I guess that's why I really asked this question - clients are usually so fee-driven that it surprises me a bit that more of them don't choose the successor sponsor route. Maybe we we just have a client base where all the owners hate each other!

[david rigby]

...and either the partners split to form their own separate businesses, or the corporation dissolves...

Just asking. Are these the same thing? That is, when one partner leaves, does that automatically dissolve the partnership?

[Belgarath]

Yes, if you had the 2-person unincorporated partnership, and one partner leaves, the partnership is dissolved. I wasn't being very precise with my language, I guess!