PC now an LLP

A CPA firm went from being a PC to being an LLP during 2017.  One partner bought out the other partner and the partner who was bought out has retired.  The remaining partner received compensation that will be on a W2 for 2017 for him, but also had some income on a K1.  I thought I read somewhere that in this case only the W2 compensation is  used for testing, employer contribution calculations, etc., but now can't find anything on it.  Is that true?

Thanks!

No.

Karoline - 

What you might be thinking of is for a shareholder-employee in an S-corporation, they receive income both from their services as an employee (W-2) and from their investment as a shareholder (K-1). For that scenario you would only use their W-2 compensation.

For partnerships, including LLPs, compensation is defined as net earned income, which is calculated in the usual way: K-1 earnings less one half of self-employment taxes, yadda yadda. Be certain to account for the portion of FICA taxes that were paid on their W-2 in order to accurately calculate the self employment taxes.

Thanks!!

Who's the Plan Sponsor?

58 minutes ago, imchipbrown said:

Who's the Plan Sponsor?

The remaining partner