Type of business entity determines what can be counted as compensation in calculating the contribution amounts for a Defined Benefit plan.
COMPENSATION QUICK REFERENCE CHART
-
- Entity Type
- Corporation
- S-Corporation
- Sole Proprietorship
- Partnership
-
- Source of Income
- W-2 Income
- W-2 + Schedule K-1
- Net Profit
- Net Profit
-
- Compensation for plan
- W-2 Income
- W-2 Income Only
- Earned Income (Calculate) * Schedule C, Line 31
- Earned Income (Calculate) * Schedule K-1, Line 14a
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.
Quick Links
-
Use compensation to create personalized estimate
CALCULATOR -
We can customize an estimate for you
DOWNLOAD ILLUSTRATION REQUEST FORM -
Questions? Call a defined benefit expert at 866-269-2706
ABOUT US