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What retirement accounts are available in this situation? MMLLC memeber

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  • #16
    401k contributions can get complex in a partnership, when you start to talk about compensation and guaranteed payments versus profit distributions.

    im not sure if profit distributions (which are what you want to maximize for QBI deduction) qualify as compensation when determining allowed 401k contributions. If you minimize guaranteed payments you may not be able to max contribute to a 401k.

    This is an area my knowledge is incomplete. There are others here that may be able to clarify

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    • #17
      Originally posted by jacoavlu View Post
      401k contributions can get complex in a partnership, when you start to talk about compensation and guaranteed payments versus profit distributions.

      im not sure if profit distributions (which are what you want to maximize for QBI deduction) qualify as compensation when determining allowed 401k contributions. If you minimize guaranteed payments you may not be able to max contribute to a 401k.

      This is an area my knowledge is incomplete. There are others here that may be able to clarify
      Had a meeting with CPA yesterday and gave him all our numbers. He is working on figuring out the best way to set up 401k employer contributions. Believe it will have to be a percentage of profits set up. Allows for some flexability based on group income each month.

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      • #18
        Originally posted by ShredtheGnar View Post

        Had a meeting with CPA yesterday and gave him all our numbers. He is working on figuring out the best way to set up 401k employer contributions. Believe it will have to be a percentage of profits set up. Allows for some flexability based on group income each month.
        some CPAs don’t know this stuff well
        report back when you get more info

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        • ShredtheGnar
          ShredtheGnar commented
          Editing a comment
          Will do! Keep your fingers crossed

      • #19
        Does this shed any light and is this info still valid? https://www.415group.com/tax-favored...r-partnerships

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        • #20
          Yes but it doesn’t address QBI deduction, partnership guaranteed payments vs distribution of profits in the new world of TCJA

          if you are compensating people on some hourly pay rate it’s going to be difficult to avoid guaranteed payments. Hourly pay sounds a lot like a wage

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          • #21
            Shred, glad you have the CPA onboard. I think that it is awesome you are learning this stuff and helping square away the new group, but I just get this vague unease reading through your posts (corporate structure, retirement plans, pay architecture, time clock), particularly with that looming end-of-year deadline. In this day and age, I don't know how small groups do it without a formally trained/experienced practice manager! To be fair, as I mentioned before, I still don't understand what business your group is doing since I've heard nothing of liability insurance, billing, contracts, office issues (non-malpractice insurance, staff, regulatory stuff, worker's comp, etc etc)....

            Again, I don't mean this with disrespect, because I've done the same type of thing (on-the-job training when we started a little company); it's just that the consequences there were pretty low.

            Looking forward to more updates.

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            • ShredtheGnar
              ShredtheGnar commented
              Editing a comment
              With structure we have, billing is done by the hospital. No office needed. Basically just providing services for the hospital through contract. Don't really have any employees unless group adopts S corp for taxation, but not planning to. There seems to be a lot of confusion about business structure due to the new tax laws. Has made things pretty complicated. We would have kept things as is, but it that might not have been totally on the up and up with new laws. Everything was done on paper by hand for record keeping/accounting. Trying to make the whole process smoother with new tech. I'm a computer guy, but not familiar with the bookkeeping software and such. Also trying to make sure we are maximizing any tax advantage we can. Gaining as much info as I can to ensure that everything is set up as needed. We have to pros on this as well. If we as a group didn't educate ourselves, would not have a clue if they were steering us in the right direction or not. I will post the results once everything is finalized in hopes it might save others some headaches. We were thrown into the fire and in panic mode, but things are starting to come together pretty quickly. Happy to have a site like this to gain knowledge from. Everyone has been great with lots of help! Would like to issue a big THANK YOU!

          • #22
            Originally posted by ShredtheGnar View Post
            So with 401k for group, employer is only allowed to contribute. Can you contribute up to the full amount ($56k) if that amount is 25% of compensation as profit sharing? Also, each member would have to recieve the same percentage, correct?
            If you don't have NHCE employees then you can certainly do that without any issues. Usually though you have a salary deferral and a match, and profit sharing up to $57k (in 2020). This also allows you to have a lower W2 to max out a 401k plan. Profit sharing only plans used to be a thing, but are not very popular anymore because they tend to blow up if you have any NHCEs (they cost a lot more in terms of employer contributions).
            Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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            • #23
              Originally posted by ShredtheGnar View Post

              Had a meeting with CPA yesterday and gave him all our numbers. He is working on figuring out the best way to set up 401k employer contributions. Believe it will have to be a percentage of profits set up. Allows for some flexability based on group income each month.
              Partnership calculations are a bit more involved but a good Third Party Administrator can do it. CPAs are notoriously bad when it comes to retirement plans, and I'm already seeing issues with their 'profit sharing only' approach. This is just wrong and says that the CPA does not know what they are doing. Don't let CPAs 'set up' your plan as they are not specialists and will not set up an optimal plan for the group because of this. You can have a 401k with profit sharing and there is no need to make a big deal out of it. That is, unless the CPA is also going to sell you some mutual funds.
              Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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