For 2011, husband and wife own 50% each of an LLC d/b/a restaurant. The spouses worked over 1,000 hours each last year, but the other workers did not (the restaurant opened in October). The husband has no other employment. The wife also works for an oil company and participates in the 401(k). She contributed $16,500 salary deferral (+ $5,500 catch up) last year and her employer contributed a match and profit sharing contribution.

1. What is the best retirement plan to set up for 2011 (limited options available at this late date)?
2. What is best for 2012? Do ownership changes need to be made to the LLC going forward? Does consideration need to be given for the other employees?

Between this couple’s CPA and me, we have come up with the following:

1. SEP IRA for 2011, but . . .since wife owns 50% or more of the LLC, is she restricted from receiving the max $49k “employer” contribution into her SEP IRA b/c she contributes/participates in her oil company 401k? If so, what is the restriction or maximum amount allowed for her into the SEP? If wife is restricted, is husband at all limited or may the “employer” contribute the maximum for him in 2011?
2. For 2012, restructure the LLC whereby husband owns 51%, wife owns 49%. Create a Safe Harbor 401(k) with discretionary profit sharing contribution component since this H & W are over age 55 and most, if not all, employees are 35 or younger. (We will employ a TPA to run the new comp plan particulars.) If these changes are made, would the wife be permitted to contribute $17k + $5,500 catch up with her oil company 401k and do the same with the newly created restaurant LLC’s SH 401k with new comp P/S?