SEP IRA with multiple businesses

Client has operated as a sole proprietor and contributes to his SEP based on the net earnings from the business every year. Client and his spouse open a new business in which they materially participate (husband /wife partnership filed 1065). In year 1, the business reports a loss for self-employment purposes. My understanding is that the SEP for a partnership would be opened at the partnership level even though the deduction is determined at the individual level. Would the client be able to exclude the net earnings from the partnership to determine his SEP contribution based on his sole proprietor business or would it have to be aggregated still? Thank you

Do the controlled group rules apply to SEPs?
Also, are the two businesses an "affiliated service group"? I don't know if those rules apply to SEPs either.

I believe the controlled group rules would apply in this situation. If so,
1. Would you net the earnings from the other business to determine the SEP contribution? For example, if the individual had two Schedule C businesses that were completely different, but only had the SEP associated with business A. Would you also need to combine the earnings (losses in this case) with business A?
2. Would the husband/wife partnership with employees now be required to provide a SEP to their employees because the husband had a separate sole proprietorship?

If you read 414(c)(1), it appears you'd have to include all businesses under common control.

(1) In general
Except as provided in paragraph (2), for purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416, under regulations prescribed by the Secretary, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer. The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (b).

I'd suggest you research what are the principles of the relevant reg that may or may not be similar to subsection (b). I think the relevant reg. is 1.414(c)-2. The answer does not look promising, based on my quick look at it.

So based on spousal ownership rules (1563(e)(5), the new partnership would fall under a controlled group with the individuals sole proprietorship business so everything has to be treated as one employer. So for purposes of making the SEP contribution for the individual, the earnings would need to be combined. The client would also need to update their plan document to include the business and see if any of the new employees would qualify.