I have a small business (LLC), which I operate part-time. I also work full time for a company and am enrolled in a 401(k) plan. Am I still eligible to make contributions to an individual 401(k) from earnings of my part-time LLC?

By Denise Appleby AAA
A:

As long as you have no ownership in the company for which you work full-time and the only relationship you have with the company is as an employee, you can establish an independent 401(k) for your limited liability company (LLC) and fund the plan from the earnings you receive from the company. However, your aggregate salary deferral contributions to both plans cannot exceed $15,500 for the year, or $20,500 if you are at least age 50 by the end of the year. (Note: These figures are for 2007.)

Bear in mind also that if the company is operated as a corporation, your contributions to the plan can be based only on the W-2 wages you receive from the LLC.

Contributions to the individual 401(k) plan can be as follows:

  • Salary deferral cannot exceed $15,500 ( or $20,500 as noted earlier), less any salary deferral contributions you make to your full-time employer's plan.
  • The profit-sharing contribution component can be no more than the lesser of (a) 25% of W-2 wages or 20% of Schedule-C income or (b) $45,000.
  • The aggregate contributions to your individual 401(k) plan can be no more than $45,000 plus catch-up contributions.

This question was answered by Denise Appleby
(
Contact Denise)

RELATED FAQS

  1. Are part-time employees eligible for fringe benefits?

    Learn how offering fringe benefits allows employers to entice new talent to join their teams, although part-time workers ...
  2. How can I become a venture capitalist?

    Find out what it takes to become a venture capitalist, and read about some of the primary attributes private equity firms ...
  3. Who is exempt from paying Social Security taxes?

    Learn about the groups of people who qualify for exemption from Social Security taxes, and explore the process of applying ...
  4. How do ridesharing companies like Uber make money?

    Discover the services a transportation company such as Uber provides and how the premiere ridesharing company operates and ...
RELATED TERMS
  1. Donation-based Crowd Funding

    Donation-based crowdfunding is a way to source money for a project ...
  2. Age Discrimination In Employment Act Of 1967

    A federal statute protecting "certain applicants and employees" ...
  3. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  4. Provisional Patent Application

    A short-term means of protecting an invention that requires less ...
  5. Cottage Industry

    A small-scale industry often operated out of a home, rather than ...
  6. Peter Pan Syndrome

    A regulatory environment in which firms prefer to stay small ...

You May Also Like

Related Articles
  1. Entrepreneurship

    How Steve Jobs Changed The World

  2. Investing

    A Look at the 5 Richest People in the ...

  3. Professionals

    Just Retired? No Better Time for a Second ...

  4. Professionals

    When Your Client's Retirement is Around ...

  5. Professionals

    A New Wake-up Call for Savers

Trading Center