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Controlled Groups for employee benefits

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17-Jan-2017 2:14pm
Arlington VA United States
Hi Pros,

Hope all is well.

We have a client (an individual) who is a 100% owner in an S-corp. This company is an advertising company with about 25 employees. Benefits are offered such as 401K & Health Insurance. The company is in Virginia.

Separately, this individual is currently a 65% Partner in a Partnership (Form 1065). The partnership owns a couple of fast-food chains in Florida. Our client is thinking of buying out his Partner and assuming 100% ownership (which I believe will automatically revert to an Sch C post buyout).

Therefore, as you can see, both companies are entirely separate and unrelated in nature.
My question is regarding controlled groups with regards to the benefits (401K, health insurance, etc.) If he were to buy out his Partner, would both his entities be considered a controlled group? Does that mean that he would now have to offer the same benefits to his fast-food chain employees as he does to his employees in the advertising company that is completely unrelated?

Thank you in advance for your time and help.

28-Jul-2017 12:08pm
North Country, USA
I’d say you’re on the right to the client’s employment / benefits attorney, don’t try to conclude on your own

For what it’s worth, clients often ask their accountant questions because they don’t know who else to ask, and they need someone to articulate any known issues or concerns for them (or direct them) to the appropriate service provider part because most accountants that I know don’t immediately bludgeon their clients with out-of-scope bills.

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