Deadlines for Making Contributions to a Solo-K (Part 2)

In the previous post, we discussed deadlines for making contributions to a Solo-K for a sole proprietorship, an S-Corp and C-Corp.  In Deadlines for Making Contributions to a Solo-K (Part 2), we will examine the deadlines for making contributions to a Solo-K for both a single-member LLC and a multi-member LLC.

Single-Member LLC

Keep in mind that with a single-member LLC, generally speaking, you will be the member and the manager of the LLC for your business.  As such, the LLC is a pass-through entity with all income flowing back to the member, in this case, the individual.   In this type of arrangement, the LLC now becomes the plan sponsor for the plan documents, even though the pass-through is to the individual.

Elective Deferrals — Elective deferrals to a single-member LLC 401(k) plan works the same as those made to a sole proprietorship as the member of the LLC is the individual (business owner).  As such, the elective deferral amounts and deadlines are the same.  The Solo-K participant may make annual, elective deferrals of up to 18,000 (under the age of 50) or $24,000 (“catch-up provision/over the age of 50).  These contributions can be made in a pre-tax or Roth basis….again, with the understanding that your plan documents permit Roth elective deferrals, and you keep these contributions separate from the pre-tax contibutions (not all plan documents permit Roth elective deferral contributions, and some companies will actually charge you more in fees just for including this option in your plan documents).

Remember, while you can make the actual deferral up to your tax-filing deadline, the election for the deferral must be made by 12/31.

Profit Sharing — Again, similar to the sole-proprietorship, contributions for profit sharing is based on net earnings which is the amount after you take the deduction for one-half of the self-employment tax, and the deduction for contributions made to your Solo-K plan. These profit sharing contributions can be made up to their tax-filing deadline of either April 15 or October 15 (with extension)).

Multi-Member LLC

Elective Deferrals — Elective deferrals to a single-member LLC 401(k) plan works the same as those made to a sole proprietorship as the member of the LLC is the individual (business owner).  As such, the elective deferral amounts and deadlines are the same.  The Solo-K participant may make annual, elective deferrals of up to 18,000 (under the age of 50) or $24,000 (“catch-up provision/over the age of 50).  These contributions can be made in a pre-tax or Roth basis….again, with the understanding that your plan documents permit Roth elective deferrals, and you keep these contributions separate from the pre-tax contributions (not all plan documents permit Roth elective deferral contributions, and some companies will actually charge you more in fees just for including this option in your plan documents).

Remember, while you can make the actual deferral up to your tax-filing deadline, the election for the deferral must be made by 12/31.

Profit Sharing — Multi-member LLCs can make profit sharing contributions for its business owners similar to what is permitted for an S-Corp or C-Corp with slight modification.  The profit sharing contribution can be made up to 25% of income to the business owner.  Unlike the S-Corp or C-Corp, it is the business owner’s income that is subject to the self-employment tax to correctly determine the calculation for the profit sharing contribution.

As always, the information provided is intended to be educational in nature.  It is not intended, nor should it be interpreted, as any form of tax, legal, financial or investment advice.  One must always consult with their respective professional in all such matters.