Accounting, Payroll & Pension Issues/401k for sole prop or LLC

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Expert: - 2/13/2008


Question
I work for an employee leasing company (PEO) and we offer 401k. Often the owner of a small business will also put himself on our payroll to take advantage of benefits we offer.  Can the owner of a Sole Prop or LLC (as opposed to S-Corp) participate in 401k? My guess is the answer is tied to whether or not they can be W-2 employees.

Answer
Sole Proprietors of an LLC cannot be an employee unless the company has opted to be taxed as a corporation. If they have taken this option they are employees.

It depends on how they have opted to be taxed.

If they are employees they can participate in the 401K if not employees they can not.

Shirley

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

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