Controll Group question

[MaryM]

My brain is not working clearly and wanted to see what you think.

We have a new client, and S- Corp(Company A) family owned.

They are starting a new 401k plan. The stock ownership for S Corp is as follows:

Dad 43%

Mom 36%

Adult Son 20%

As we are working on the adoption agreement for the new plan we found out that the S- Corp also owns 98% of a newly formed LLC that will do the same type of business in different location.

The ownership of the LLC is

98% company A

2% unrelated person

After typing this out I am pretty sure it is a control group and they should cover the new LLC. Currently the only employees of the LLC also work for the company A and receive w-2 wages from them. So in my mind they are covered already by the new plan. Future employees though will have to be included for coverage testing if they client opts not to cover the LLC. correct? Sorry if this is a stupid question

[Lou S.]

Looks like a clear parent subsidiary relationship with S-Corp owning more than 80% of the LLC.

[MaryM]

Thanks for the verification.