Partnerships Questions - taxes and retirement - Mothering Forums

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#1 of 6 Old 08-10-2012, 12:50 AM - Thread Starter
 
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DH has been offered a partnership in an LLC (limited liability company). We hired a corporate transactional attorney to review and advise us on the operating agreement, which has been deemed "very fair" and we understand it. If he accepts the offer, it will take effect before year-end 2012.

 

I have three referrals for tax professionals (two definitely do corporate taxes; not sure about the third). Before I contact them, I want to be a little more educated. I went to the IRS website and looked up Schedule K. There are a few of them and they didn't include what I was expecting to see. My understanding is the tax-related aspects of the partnership pass through to the partners at their respective percentages of ownership. What are some of the tax advantages to this arrangement? I didn't see anywhere to report expenses that would lower the profits/income. Schedule C says sole proprietorships and Schedule E led me to believe it was for real estate-related companies, which is not the case here. I'm looking to find what we should be recording/doing in ADVANCE of filing. Plus, I believe we will then be subject to quarterly estimated tax payments, although I hear that can wait until the IRS requires it.

 

Meanwhile, I am also wondering if DH will be able to contribute to a retirement plan more aggressive than an IRA/Roth IRA (in terms of contribution limits). His company does not offer a 401k and neither will the partnership. We currently both contribute to our IRAs. If he is able to open a form of 401k, will I still be able to contribute to my IRA?

 

Any links or tips are appreciated. Thank you!


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#2 of 6 Old 08-10-2012, 04:16 AM
 
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I am a staff accountant, not a CPA, but I will share what I know about how income from LLCs pass thru to the individual.  Cash flow analysis was part of a former job.

 

The LLC's expenses would be deducted from income prior on it's tax return.  When that income or loss hits your personal return, the number is what it is, you don't reduce that by any further deductions.  Personally, youu won't have any advance planning to do for schedule K income, that is done by the LLC.

 

Don't have anything to offer about the retirement plan questions.


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#3 of 6 Old 08-10-2012, 05:09 AM
 
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Read up on Sep-ira

http://en.wikipedia.org/wiki/SEP-IRA

 

On this site, eligibility includes partnerships, but it is possible that the LLC has to open the sep-ira, rather then just yourself. Not sure about that. (I was the sole proprietor of my llc, so I didnt have to discuss these things with anyone)

https://www.fidelity.com/ira/sep-ira?imm_pid=3&immid=00527&imm_eid=e28459568&buf=999999

 

 

"If you are in a SEP or SIMPLE IRA plan
In most cases you can make a regular IRA contribution ($5,000/$6,000) to your SEP IRA in addition to your employer’s contribution. You cannot make regular IRA contributions to a SIMPLE IRA. A Roth IRA cannot be used to hold contributions made under a SEP or SIMPLE IRA plan."

http://www.irs.gov/retirement/article/0%2C%2Cid=111413%2C00.html


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#4 of 6 Old 08-10-2012, 12:13 PM - Thread Starter
 
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Thank you both! I am beginning to understand this arrangement (LLC partnership) better from a tax perspective. :)

 

By following the links above and continuing to search, I found the following on the IRS website:

 

 

Quote:

Can each partner in a partnership maintain a separate SEP plan?

No, only an employer can maintain and contribute to a SEP plan for its employees. For retirement plan purposes, each partner or member of an LLC taxed as a partnership is an employee of the partnership.

The partnership:

  • deducts plan contributions for employees other than the partners as a business expense on Form 1065, U.S. Return of Partnership Income (instructions);
     
  • reports plan contributions for partners on each partner’s Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc. (instructions).

 From that, it sounds like DH's company (LLC) will need to set up the SEP-IRA. Hmmmm.... That takes us back to square one as far as retirement goes...


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#5 of 6 Old 08-11-2012, 02:20 PM
 
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Quote:
Originally Posted by sunnysandiegan View Post

Thank you both! I am beginning to understand this arrangement (LLC partnership) better from a tax perspective. :)

 

By following the links above and continuing to search, I found the following on the IRS website:

 

 

 From that, it sounds like DH's company (LLC) will need to set up the SEP-IRA. Hmmmm.... That takes us back to square one as far as retirement goes...

Maybe that needs to be a condition of agreeing to the LLCwinky.gif.  It shouldn't be that costly to offer it is funded with your DH salary.  I would think the other partners might want to retire someday too.

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#6 of 6 Old 08-11-2012, 10:20 PM - Thread Starter
 
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Exactly my thoughts!!! :)


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