R. Butler Posted November 15, 2017 Posted November 15, 2017 Essentially have a father/son medical practice. Father owns 100% and is taxed as a sole proprietor. Son has been practicing at the business for years as an employee. Multiple CPAs have advised them that the son should incorporate and work for the father as a contractor. They have advised them that one of the benefits is that the son can set up his own 401(k). Am Is missing something? Even if they could assert that the son is no longer an employee I don't see how they get around the related group issues. Thanks for any guidance.
ETA Consulting LLC Posted November 15, 2017 Posted November 15, 2017 The "idea" may work, but you'd have to perform a detailed analysis of all the facts to ensure there isn't a related employer group with respect to all the rules. A part of this analysis would be ascertaining why the father's business doesn't already have a plan in place. Good Luck! CPC, QPA, QKA, TGPC, ERPA
Belgarath Posted November 15, 2017 Posted November 15, 2017 Is it really a related group problem? There's no cross-ownership whatsoever (or won't be) - right? Doesn't sound like it would be a management function ASG either.
R. Butler Posted November 15, 2017 Author Posted November 15, 2017 The father's business does have a profit sharing plan in place. Among other things, they want the son to be able to have a 401(k) without offering the same to the father's employees. Also if the son is treated as a separate, unrelated employer the son would get a larger employer contribution than nondiscrimination testing currently allows.
R. Butler Posted November 15, 2017 Author Posted November 15, 2017 42 minutes ago, Belgarath said: Is it really a related group problem? There's no cross-ownership whatsoever (or won't be) - right? Doesn't sound like it would be a management function ASG either. Wouldn't we have constructive ownership under 318?
RatherBeGolfing Posted November 16, 2017 Posted November 16, 2017 20 hours ago, R. Butler said: Wouldn't we have constructive ownership under 318? For a CG it would be Section 1563 attribution which would be limited to/from an adult child. 401king 1
R. Butler Posted November 16, 2017 Author Posted November 16, 2017 7 hours ago, RatherBeGolfing said: For a CG it would be Section 1563 attribution which would be limited to/from an adult child. Agreed, but for a affiliated service group it is 318, not 1563 and the rules are slightly different under 318.
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now