Professional Associations

Trying to learn about this type of business entity and I'm having trouble finding something definitive regarding their abilities to sponsor a 401k plan.  I found a lot of info regarding their involvement with MEPs, PEPs, unions, and vebas but not anything discussing whether a single employer PA can sponsor a plan.  Specifically, can a realtor who, although associated with a large real estate firm, is individually a PA, sponsor a 401k?

I've also read that PAs are a type of corporation that can be treated as LLCs - does this mean owners can either be paid via W-2 wages, schedule c income or K-1 income depending on how the PA  chooses to be taxed?

PA's are usually professional associations, and are creatures of state law.  Some states have Professional Corporations in lieu of PAs.  Some  have Professional Sewrvice Corporations in lieu of PAs. 

State law determines who can organize as a PA/PC/PSC and who owners can be. 

In geberal, they are similar to corporations, single director/owner corporations in your case.

My experience is that PA/PC/PSC employees are W2 emloyees.

This is just the tip of the iceberg.  Your other questions don't have enough facts to answer.

Almost all real estate agents are considered independent contractors because their income is dependent on sales and not hours worked.  The real estate firm does not tell them what hours to work and the real estate agents typically have to pay for substantial expenses (marketing, selling expenses, etc.).  Based on these items, the real estate agent can sponsor their own retirement plan.

A PA is a corporation that can be elected to be taxed as a c-corp or s-corp, so a W-2 would need to be issued.  A LLC can be taxed as sole proprietor (sch C) or a c-corp or a s-corp.

I agree with Ebplans and Dara. A PA is a form of professional corporation established by state law. I know that New Jersey, for example, only allowed for Professional Associations but not Professional Corporations (even though Professional Corporations could be established in NY or PA). I know that NJ later changed its law to allow professionals to form professional corporations or professional associations. Perhaps their initial reluctance to allow for professional corporations was a fear that the professional would use the limited liability of a corporation to avoid potential malpractice liability -- even though the statutes establishing such entities clearly state that nothing in the law is to be interpreted as limiting the liability of any individual who happens to be a shareholder or employee of that entity.

The first and most important question is whether the person is considered self-employed or is an employee of the agency. I agree with Dare that RE agents are almost always self-employed contractors which means they should be paid their commissions via 1099s.

From there, it's a matter of how the person is set up for their corporate tax structure - the legal entity. That is important for determining how compensation is reported, and what counts as compensation. Note that if it's an S-corporation (or entity that can treat itself as an S-corp) that only W2 compensation paid to the owner-employee is considered compensation for retirement plan purposes and dividend distributions reported as K1 income does not count as compensation.

Thank you all for your input - very helpful.