Why We Ask About Other Companies You Own
Before setting up your 401(k) plan, we need to know if any company shareholders have ownership in any other companies.
Here’s why:
Preventing Unfair Exclusion: When the same people own multiple companies, there's a risk of setting up a plan that favors certain employees or owners while excluding others. The IRS has rules to ensure this doesn’t happen. 401(k) plans are designed to benefit the employees of a company, not just the owners.
Starting Off on the Right Foot: Providing the correct information on other company ownership helps ensure that your plan is set up to consider requirements to cover employees across related companies. Keep us in the loop as ownership shifts over time so we can continue to support your plan and avoid unexpected penalties and fees.
What to Consider
One company with employees: If you own several companies but only one of them has employees, you can set up the 401(k) plan for that company alone.
Multiple Companies with Employees: If you own multiple companies with employees, the IRS may consider them a single employer for 401(k) purposes. It’s often easier to include these business in a single plan — separate plans require coordination for accurate testing.
These rules are complex, so you should consult an attorney to determine if your businesses are related. Remember, Aboon cannot give legal advice.
What to Do Next
If you own multiple companies with employees, we'll ask you to provide census data for all your companies with common ownership. Our support team can help you understand how this might affect your 401(k) plan.