Type of business entity determines what can be counted as compensation in calculating the contribution amounts for a Defined Benefit plan.
Limited Liability Company (LLC) — compensation for plan depends on how LLC is taxed. See above for partnership or corporation rules.
Employees, other than owners, are paid W-2 income for all entity types.
Earned income = net profit (line 31 of the Schedule C as a sole proprietor or line 14a of the Schedule K-1 as a partnership) minus ½ self-employment tax minus plan contribution. Deductions for sole proprietors or partnerships are limited to net profit minus ½ self-employment tax.
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