Partner and sole proprietor and same client

Accountant is 50% partner in a LLC

A client of the LLC hires the accountant personally separately from the LLC's work to oversee work related to possible sale of the company. Client pays the accountant separately for this work.

Can the accountant have a pension plan separately from the partnership based on this revenue?

In order to have a separate plan based on this revenue, you must substantiate that it is not part of a related employer group.  Seems as if his work as a sole proprietor may be an Affiliated Service Group.  This would by my first thought. 

Good Luck!

More important:  Are his co-members aware of this arrangement and ok with it?

Putting aside the ethical issues and assuming the arrangement has bona fide substance and would be respected by IRS outside of the qualified plan area:

(a) Whether you have an affiliated service group would depend on whether the sole proprietorship is "regularly associated" with the LLC in the performance of services. See IRC sec. 414(m)(2)(A) and withdrawn proposed regs for whatever they're worth. Presumably not, since the position will be that the sole proprietorship's services are completely separate from what the LLC does for "client," billing and revenue is separate, etc. Also, you could have a 414(m)(2)(B) issue if the sole proprietorship uses the LLC's support staff in servicing the client, but again probably not your facts.

(a) Unlike for affiliated service group purposes (see IRC sec. 414(m)(6)(B)), the IRC sec. 318(a)(3)(C) principle that would attribute the individuals 50% ownership of the LLC to his sole proprietorship does not seem to be operative for controlled group purposes. See Treas. reg. sec. 1.414(c)-4(b). Nevertheless,  the IRS could argue that because the individual and his sole proprietorship are the same legal person, the sole proprietorship is a 50% owner of the LLC (parent) and you test 415 controlled group under the 50% parent-subsidiary rule, not 80%. See IRC sec. 415(h). Stand ready to be corrected on that if anyone has evidence to contrary.

On 12/22/2017 at 7:43 PM, Luke Bailey said:

 "regularly associated"

One could easily argue that when the sole prop receives 100% of its revenue from performing services to the LLC's clients; it would constitute 'regular association'.  If not for the LLC, it wouldn't have any income.  Otherwise, how would you measure 'regular association'?

Good Luck!

Luke - the 415(h) control test replaces 80% with "more than 50%."

Good point, jashendorf.