A:

In a word, yes. A limited liability company (LLC) is eligible to establish a simplified employee pension (SEP). Keep in mind that plan contributions (including SEPs) are usually based on W-2 wages if the business is a corporation. This means that you may need to pay yourself W-2 wages in order to be eligible to receive an SEP contribution from the business. Check with your tax professional to be sure.

Contributions may be as much as 25% of your compensation, and they may not exceed $41,000 (for 2004). For unincorporated businesses such as sole proprietorships, partnerships and limited liability partnerships (LLPs), plan contributions may be up to 20% of the business owner's modified net profit.
Should you decide to hire employees, they must also be covered under the plan if they meet the eligibility requirements.

To learn more about setting up an SEP IRA, read Establishing An SEP IRA; Plans The Small Employer Can Establish and Common Questions About Retirement Plans.

Also see IRS Publication 560, available at http://www.irs.gov/pub/irs-pdf/p560.pdf.

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. What are the requirements for being a Public Limited Company?

    Discover the various different requirements that a company must meet in order to be recognized and traded as a public limited ...
  2. What types of capital are not considered share capital?

    Find out what types of capital are not considered share capital, including an explanation of the different types of share ...
  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Find out why it is important to safeguard your general partnership in the even that one member becomes disabled, dismembered ...
  4. What are the benefits for a company investing in a greenfield investment?

    Learn about greenfield investments and the primary potential advantages for a company that chooses this method of foreign ...
RELATED TERMS
  1. Qualified Longevity Annuity Contract

    A Qualified Longevity Annuity Contract (QLAC) is a deferred annuity ...
  2. See-Through Trust

    A trust that is treated as the beneficiary of an individual retirement ...
  3. Enterprise Investment Scheme (EIS)

    A UK program that helps smaller, riskier companies to raise capital ...
  4. Maquiladora

    A Spanish term for a factory located near the United States-Mexico ...
  5. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
  6. Per Transaction Fees

    An expense a business must pay each time it processes a customer’s ...

You May Also Like

Related Articles
  1. Entrepreneurship

    Netflix's New Strategy: Penetrate Your ...

  2. Investing Basics

    4 Ways Millennials Can Buy Private Businesses

  3. Entrepreneurship

    Nike and the NBA, a Perfect Duo?

  4. Stock Analysis

    Is PayPal Worth More Than eBay?

  5. Retirement

    How to Battle Inflation During Retirement

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!