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Ask Law Educator, Esq. Your Own Question
Law Educator, Esq.
Law Educator, Esq., Attorney
Category: California Employment Law
Satisfied Customers: 113425
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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I was told to contact you regarding how to handle my being

Customer Question

I was told to contact you regarding how to handle my being partners in two businesses. Company A is currently enrolled in a 401K. In that company I am 70% partner. I am also partners in an unrelated business with my wife. I am 20% owner she is 80%) . I am of the understanding that we can somehow include the second partnership as part of this 401. Is this a controlled group under ERISA
Submitted: 1 year ago.
Category: California Employment Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
In order for this to be a brother/sister controlled group the same five or fewer individuals must own, directly or indirectly by attribution, 80% or more of the vote or value of the stock of each business. Only shareholders owning interests in each potential member of the group are counted–any shareholder who does not own stock in all of the companies being considered is ignored. The owners identified above must own more than 50% of the vote or value of each business, taking into account ownership of each person only to the extent identical for each company. The determination is made by adding together the lowest ownership percentage for each owner in the companies being tested.
So if you only own 20% and she does not own anything of Company A, such that you both jointly control the 100% of each company, then it would not qualify. If your wife was a 20% partner in Company A and you 80% and then you were 20% in Company B and your wife 80%, then the companies could be deemed a controlled group as a brother/sister controlled group. See also: https://www.irs.gov/pub/irs-tege/epchd704.pdf

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