LLC Taxed as Corporation - Recommended Retirement Plan

[Guest Mickey]

My wife and I are independent consultant and both own 50% each of our LLC. What would be the best retirement plan to setup for the LLC to contribute to a plan and use that as a tax deductible business expense to the LLC before profit.

The LLC is taxed as a Corp. and we do not issue any W2's to anyone, We issue 1099's for contractors to pay their taxes via their individual 1040's, if there is any profit as a result of the LLC we will issue W2s to ourselves, but its very little. [edited for better clarity]

The LLC make about $10,000 - $15,000 per year.

Would like to have the flexibility to contribute when times are good and not when there is no profit.

[jpod]

How are you independent contractors for your own company? Last time i checked under the Internal Revenue Code corporate officers are automatically deemed to be W-2 employees of the corporation (and by your election to be taxed as a corporation this applies notwithstanding your LLC status).

[ESOP Guy]

I would add that any retirement plan the LLC could use would only be allowed to make contributions based on compensation paid to employees. So if you are not employees and aren't being paid wages as employees there is nothing to contribute on for the LLC.

Assuming you are allowed to be self-employed you could set up one of the various plans for the self-employed.

[Guest Mickey]

Ops, sorry, I meant to say/write, we issue W2 to our contractor help and have them pay via their individual 1040's. We received a small profit for our W2.

[Bird]

Ops, sorry, I meant to say/write, we issue W2 to our contractor help and have them pay via their individual 1040's. We received a small profit for our W2.

That makes less sense and doesn't agree with the clarification in the original post. I think you give 1099s to your contractors, right?

The bottom line is, you can make retirement plan contributions based on your compensation. For this purpose, that would be your W-2s. If your pay is low, you can maximize contributions by setting up a SIMPLE and deferring 100% of pay, up to $12,000, plus $2,500 if over age 50 (if you don't participate in a 401(k) elsewhere and maximize those contributions). That involves withholding contributions from your pay. Otherwise the business can establish a SEP and contribute up to 25% of pay as an employer contribution, after the end of the year.

[GBurns]

Mickey.

I suggest that you get legal help You have many issues that seem to be misunderstood.

You cannot issue W-2s to your contractor help.

Your contractor help "cannot pay via their individual 1040's", although it is not clear what they are paying.

You do not get profit on a W2..