I am starting a limited liability company (LLC). I will be the sole member. Can I open an SEP IRA? How much tax-deferred money would I be able to contribute each year?

Retirement, Retirement Savings, IRAs
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May 2018

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 a SEP contribution from the business. Check with your tax professional to be sure.

Contribution Limits

Contributions cannot exceed 25% of your compensation or $55,000 for 2018 (whichever is the lesser of the two). 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. For more information check out IRS Publication 560.

(To learn more about setting up a SEP IRA, see: Business Owners: How to Set Up An SEP IRA.)

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