Who's the Employer?

Answer: This question is really a continuation of Q&A 107, and requires somewhat the same response.

The key player in a management function group is the mangement organization, which is defined in section 414(m)(5) as "an organization the principal business of which is performing, on a regular and continuing basis, management functions for 1 organization (or for 1 organization and other organizations related to such 1 organization)." To be a management organization, you must have an organization, just as you must have an organization in order to have a service organization. The doctor's corporation isn't managing the partnership. The doctor is doing the managing, in his capacity as a partner. That is not a separate organization, and so a management function group does not exist, as I see it, under IRC 414(m).

But what if the doctor is a separate "organization"? He manages two businesses, the professional corporation and a partnership. Would that make a management function group out of all three? No.

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