Multiple Businesses SEP Contribution rules

Submitted by Stan Hall on Thu, 2017-06-08 18:23

I have a client who currently owns an LLC reporting as a Sub S. A SEP has been established. The owner is the only employee and is contributing the max to the SEP, 25%.

The same owner is about to establish another LLC. Unlike the first LLC, this one will have employees other than himself. He wants these employees to have SEP contributions but not at 25%. Can he do this or will he have to contribute to them the same percentage he is giving himself in the first LLC.

Thanks for you help. Stan.



Submitted by William Tuttle on Fri, 2017-06-09 17:04

  • With 100% ownership of both businesses the owner would generally have to contribute equal percentages to all employees of both business’.
  • However, the owner should check and amend if necessary the adoption agreement for the original SEP IRA before hiring any employees. With a SEP IRA, you can require employees to be; >= age 21, employed for at least three of the past five years and receive >= $600 in compensation for the year before being eligible to participate in the SEP IRA.

 

Submitted by Alan - IRA critic on Sat, 2017-06-10 16:55

Note that client will also be subject to a single annual additions limit of 54k for both plans if his income is high enough to trigger that limit.

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