Partners in S Corp, C Corp, or LLC: K-1: What is earned Income?

[Alex Daisy]

I understand that only income for partners of certain type of entities is eligible compensation for 401(k) purposes.

Can someone tell me if I can use the K-1 earned income for the partners in a S Corp, C Corp, or LLC?

Any guidance is greatly appreciated

Alex.

[John Feldt ERPA CPC QPA]

In an S Corp or C Corp, they are considered as shareholders by the IRS, not partners. Thus, the K-1 provides dividend information, not partner earnings, and none of that is counted as compensation for retirement plan purposes.

In an LLC, the determination is made based on how the LLC has elected to be taxed. If they elect to be taxed as a corporation, then see above. Otherwise, if a partnership or sole prop, then yes, the K-1 is used, with adjustments, to get your net earnings from self-employments which can be used for reitrement plan purposes.

edit: typo