Limited Liability Company Distribution

[Guest JanetGS]

Hello,

Is a distribution from an LLC to a member (owner) a permissable basis for making a deferral or employer contribution to a tax qualified retirement plan?

Thanks for the help!

[Jim Chad]

How is this company taxed? Is it taxed as a Sub-S?

[Guest JanetGS]

How is this company taxed? Is it taxed as a Sub-S?

Thank you for responding Sir. It is taxed as a partnership or sole proprietorship, according to the plan document.

[Guest JanetGS]

Here's how I see it.

If the distirubitons are characterized as 'earned income' for services provided by the members from the LLC, then those dollars can be used to fund contributions to a tax qualified retirement plan. Otherwise the LLC can pay its members bonus compensation instead to make the sought for contributions to the plan.

Is that wrong?

[rcline46]

Did the distribution end up on the Schedule SE? If not, then cannot use as it was not 'earned income'.

[Guest JanetGS]

Did the distribution end up on the Schedule SE? If not, then cannot use as it was not 'earned income'.

That's what I needed to know. Now I can ask the client that question and proceed. Schedule SE income means EI.

I appreciate your help. Good day.