Subscribe Now!
Free Daily News, Jobs, Webcasts, Discussions
Post and Distribute
Your Jobs
ARPA News
ARPA Webcasts

Featured Jobs

DB/DC Administrator

Primark Benefits
(Telecommute / Burlingame CA)

Primark Benefits logo

DC or DB Administrator

Farmer & Betts, Inc.
(Telecommute / Tacoma WA / Tualatin OR / Littleton CO)

Farmer & Betts, Inc. logo

DB Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

Employee Benefits/Health and Welfare Attorney

Miller Johnson
(Telecommute / Grand Rapids MI / Kalamazoo MI / Detroit MI)

Miller Johnson logo

Retirement Plan Administrator

My Benefits, LLC
(Telecommute / Daphne AL / Atlantic Beach FL)

My Benefits, LLC logo

401(k) Implementation Manager

Human Interest
(Telecommute / San Francisco CA)

Human Interest logo

Product Support Consultant

ftwilliam.com part of Wolters Kluwer Legal & Regulatory
(Telecommute)

ftwilliam.com part of Wolters Kluwer Legal & Regulatory logo

Retirement Plan Administrator

Bates & Company
(Telecommute / Winter Park FL)

Bates & Company logo

Director of Finance

NYCDC of Carpenters Benefit Funds
(New York NY)

Retirement Plan Consultant / Relationship Manager

Associated Pension Consultants
(Chico CA / Sacramento CA)

Associated Pension Consultants logo

DC Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

Retirement Plan Administrator (Account Manager)

Kushner & Company
(Telecommute / Portage MI)

Kushner & Company logo

Plan Document Specialist

Jocelyn Pension Consulting
(Telecommute / Boulder CO / San Rafael CA)

Jocelyn Pension Consulting logo

401(k) Consultant

TPS Group
(Telecommute / North Haven CT)

TPS Group logo

Retirement Plan Administrator

RSW & Associates
(CT / NJ / NY)

RSW & Associates logo

Director of 401(k) Implementation, Core

Human Interest
(Telecommute / Mill Valley CA)

Human Interest logo

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Controlled Groups Without Employees

(Posted August 29, 2002)

Question 227: Corp A is 100% owned by a husband and wife. Corp B also is 100% owned by them. Company C is owned 95% by the husband and wife and 5% by their daughter. Only Corp A has employees. I would classify this as a controlled group, but does the fact that B and C have no employees (they're essentially shell companies) matter?

Answer: If a tree falls in a forest and nobody is around to hear it, does it make a sound? Of course it does.

If you have three corporations which, after attribution, are all owned 100% by the same person, do you have a controlled group? Of course you do. Controlled group status has nothing whatsoever to do with the number of employees that are in a company. It is only concerned with who owns the stock.

Ah, but what does it matter if the tree makes a sound when nobody is around to hear it? Or rather, what does it matter if a corporation is a member of a controlled group if its sister corporations don't have any employees? Actually, it matters in several ways.

A corporation that is a member of a controlled group cannot file Form 5500-EZ. It must file Form 5500, regardless of the amount of assets in the plan. The rule (from the instructions to the Form 5500) has no exception for controlled corporations that have no employees.

Naturally, if any of the owners ever decides to take a salary from B and C, that would be included in his or her total compensation for purposes of Corp A's plan.

For ordinary income tax purposes, the fact the three corporations are in a controlled group means a single set of tax rates is shared between them.

For more on controlled group determinations, see chapter 6 of my book, Who's the Employer.


Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2021 BenefitsLink.com, Inc.