Individual A owns 100% of Company A. He also owns 50% in LLC B. The other 50% of LLC B is owned by an unrelated individual. LLC B employs 20 indviduals. Company A is interested in establishing a defined benefit plan covering the only two employees of Company A .... A and A's spouse

I know that I have certain affiliated service group rules based on my understanding of the relationship between Company A and LLC B. However, I want to be sure that I do not have any controlled group issues.

I believe that a controlled group does not exist.

Thanks in advance for your comments.

Ed

Based on what you have indicated, they are not a controlled group.

As with all things however, the devil is in the details. You should consider retaining qualified counsel to confirm whether a CG or ASG exists.

In order for a brother-sister controlled group to exist, two tests must be met. The same 5 or fewer persons must own at least 80% of each entity and the identitcal ownership must be more than 50%.

In this case, you do not meet either of the two tests. The 80% requirement is applied to those persons who own something in each entity. In your case, the 100% owner of A owns only 50% of LLC B, so the 80% requirement is not met. In determining identitcal ownership, you look at the lowest percentage owned by each person in the entities. The identical ownership for A is only 50% (the amount of his or her ownership in the LLC). Since it is not more than 50%, it also fails the second part of the test.

This is based upon your indications that the other 50% owner of B is a completely unrelated party. if the person is required to be aggregated with A, you would have a controlled group. As you stated, you do need to also be aware of the ASG rules.

PIP is quiker than I am. I'm more long winded.

Thanks for the responses. I'm all set. Ed