Full question:
Can a Washington State single member LLC transfer half the shares to his spouse so that they both can make IRA contributions? (Under a single member LLC one can make contributions to a SEP IRA, and IRS filing is easy). My tax adviser writes, 'I might suggest would be to transfer half of your US LLC shares to your wife and then she would report half the income. Then, you could both contribute to a self employed 401 K and this would achieve a higher overall contribution to a retirement plan than the $40 K you are limited to for 2009. You might discuss this with your investment adviser: could both of you contribute to a 401 K even if you jointly own the LLC? Is this true? What are the precise benefits? I assume that it would no longer be a single member LLC. If indeed possible as suggested, is there any downside? Personal info: Married, filing jointly, 2009 combined income est. $306 K, LLC income is $200 K (thus the potential $40 K SEP IRA contribution). Many thanks for all details.
- Category: LLC
- Date:
- State: Washington
Answer:
Ownership of an LLC, including a single member LLC, is typically governed by the operating agreement. This agreement outlines how new members can be added and how they can buy into the company. Common elements of an LLC operating agreement include:
- Company name and address
- Registered agent information
- Names and addresses of each LLC member
- Management structure and operations
- Items contributed by each member
- Fair market value of contributions
- Date of company dissolution
- Accounting method
- Tax treatment of the LLC
- Sample resolutions for the LLC
- Appointment of LLC officers
- Final capital pay-in date
By transferring half of the LLC shares to your spouse, the LLC would no longer be classified as a single member LLC. This change allows both of you to report income and potentially contribute to a self-employed 401(k), which could increase your overall retirement contributions beyond the limit for a SEP IRA. However, it is essential to consult with your tax and investment advisers to understand the implications and any potential downsides of this transfer.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.