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 $53,000 (for 2016). 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.
Also see IRS Publication 560.
The Advisor Insight
If you have your own company, whether you are an LLC or even a sole proprietor (in which you report your income on Schedule C of your personal 1040 tax return), you can open and fund a SEP IRA. It’s an employer plan that you will fund with COMPANY money, in contrast to a 401k or Traditional IRA/Roth IRA that you fund personally.
You are able to fund up to 20% of your company earnings. So if your company makes $200,000, you can defer $40,000 into the plan.
In 2018, the maximum contribution can be $55,000 or 25% of total compensation (if you are the only employee) up to $275,000, whichever is less. For high-income sole-member LLCs, a SEP IRA is a great way to go. If you are making less, other options may be better, like a Solo 401(k) or a SIMPLE IRA.
STA Wealth Management, LLC