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i401(k) and annual contribution limits
Old 11-09-2014, 09:11 AM   #1
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i401(k) and annual contribution limits

Here is the basic situation:

In the past, a single LLC (LLC 1) has generated the vast majority of HHI. Enough that the standard $17.5K plus 20% net income got both me and DW to the ~$50K/year/person contribution limit (i.e., $100K total pretax).

Moving forward, LLC 1 will be scaling down and definitely won't generate enough net income to get both me and DW to the $52K limit for 2015. A new LLC (LLC 2) will start generating significant income in 2015. For the sake of this discussion, let's say in 2015 LLC1 will generate just enough to get one of us to the $52K limit and LLC2 will generate just enough to get the other one of us to $52K.

So my question is this, for purposes of i401(k) contributions and in particular the "profit sharing" component, are those tied to the LLC or just to our household/passthru income? Put another way, will we need to open another i401(k) and "tie" it to LLC 2 for net income profit sharing, or can I continue to funnel all contributions through the existing i401(k)?
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Old 11-11-2014, 11:47 PM   #2
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If you used a separate EIN for the 401K, that is not tied to either one, then I think not. However if it is tied to LLC1, then yes a new one for LLC2 makes sense.
Of course if LLC1 owns LLC2 then everything is still attributable to LLC1 and no change is needed.
Mind you, I'm not a tax lawyer,
My thinking is the safe answer is to open a new i401K for LLC2 and treat each i401K as though they are tied to each LLC.
Thats a nice problem to have... congratulations.
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Old 11-12-2014, 07:23 AM   #3
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Quote:
Originally Posted by Sunset View Post
If you used a separate EIN for the 401K, that is not tied to either one, then I think not. However if it is tied to LLC1, then yes a new one for LLC2 makes sense.
Of course if LLC1 owns LLC2 then everything is still attributable to LLC1 and no change is needed.
Mind you, I'm not a tax lawyer,
My thinking is the safe answer is to open a new i401K for LLC2 and treat each i401K as though they are tied to each LLC.
Thats a nice problem to have... congratulations.
That was my basic conclusion as well. Plus, having two helps with plan size and form 5500-SF. Thank you!

Anyone else have knowledge or experience in this?
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