A potential client (sole prop) is interested in setting up a DB plan. He has no employees. He receives his earned income from various partnerships that being partnerships have other partners. Would these other partners need to be considered to determine if there is a controlled group before setting up a plan?? Thanks.

Yes, you will have to look at the ownership structure for all partners involved.

Thanks for the response, I have updated information: The Sole prop is a land developer. He is a parnter in a partnership where he is the only one earning income, the other partners are solely investors. I think I'm ok setting up a plan for his sole prop, but all opinions are appreciated. Thanks.

I would agree that since he is the only partner actually performing services then no other partners would be considered in the plan.

Thanks again, but i now have more updated info. Apparently there is a 1% general partner that has earned income. Do you think that would change things. Thanks.

Yes, he would be included. Is he an HCE? If so, you could write your document to exclude HCE with less than XX% ownership.

Sorry, that won't work in DB plan, since you have 2 or more who are not statutory exclusions, and 401a26 requires at least 2 participants.

Thanks again for the responses, the 1% partner is another partnership (with no employees), does that mean that all partners of teh 1% partnership need to be considered in the DB???

How many people have earned income from this partnership? How many partners combined produce a controlled group situation? Investment partners who receive passive income only don't count. Who's left?

I'm sorry about the sketchy info, but I'm getting it second hand. My prospective client is a partner in several partnerships owning between 5% and 30% of the partnerships. The only other partner with earned income is a partnership that is a 1% partner. This 1% partnership is owned 20% by my client who receives passive income from this partnership, 20% by second individual who also receives passive income and 60% by a corporation which has earned income. My client is not associated with this corporation in any way besides the common ownership in the 1% partnership. Does this help?? I know it helps confuse me even more. Thanks for any help.

Sorry, I forgot you said you were setting up a DB plan. My comment earlier was in regards to a DC plan.