Author Topic: best retirement account for LLC owner  (Read 969 times)

Pookie

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best retirement account for LLC owner
« on: March 01, 2018, 09:50:17 AM »
My husband and I own rental properties and we'd like to put money into investments at VG. I already have a VG traditional IRA and a VG Roth IRA.

Would I have to open a new account (Sep IRA or solo 401K) to invest additional money? What type of account is best/simplest?  How to I determine the max I can invest?

We are our only employees - not sure if we will have other employees in the future.


El_Viajero

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Re: best retirement account for LLC owner
« Reply #1 on: March 04, 2018, 01:58:19 PM »
Self-employed, single-member LLC owner here. I have a SEP IRA. It lets my employer (me) contribute up to 20% of self-employed income per year + an annual employee (also me) contribution of whatever the traditional IRA limit is... $5,500 currently.

So if my net income is $100,000, I can make an employer contribution of $20K and an individual contribution of $5.5K for a total of $25,500 in tax-deductible annual contributions.

I'm not sure how the arrangement changes for a dual-owner LLC that may or may not have official employees on an actual payroll. Others can weigh in on that. Regardless, the SEP IRA is probably going to be a better arrangement than just a ROTH and/or individual traditional IRAs. That's just the investment vehicle I happen to know about. There might be others that are more advantageous for your situation.

SeattleCPA

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Re: best retirement account for LLC owner
« Reply #2 on: March 05, 2018, 07:02:53 AM »
The LLC doesn't change the character of your income... so putting rentals into an LLC doesn't magically make the income "self-employment earnings" which is basically what you need in order to create a pension deduction.

BTW, you probably want to think about the new Sec. 199A deduction which will apply to your rentals. E.g., that deduction may let you just "not pay tax" on the last 20% of profit you make in your real estate business. That's probably a better deal than a pension deduction.

I've got a bunch of Sec. 199A related posts at my blog (link in sig)... but the Sec. 199A is a pretty deal deal.

h82goslw

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Re: best retirement account for LLC owner
« Reply #3 on: March 05, 2018, 07:16:30 AM »
I just heard about the Section 199 from a tax attorney.  Very happy Congress added that into the new tax law. 

SeattleCPA

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Re: best retirement account for LLC owner
« Reply #4 on: March 05, 2018, 10:36:27 AM »
I just heard about the Section 199 from a tax attorney.  Very happy Congress added that into the new tax law.

Sec. 199 went away. That the domestic production activities deduction.

Sec. 199A is new for 2018. It's the "pass through deduction". A big, big deal:

https://evergreensmallbusiness.com/pass-thru-income-deduction-dozen-things-every-business-owner-must-know/

chasesfish

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Re: best retirement account for LLC owner
« Reply #5 on: March 05, 2018, 06:40:53 PM »
Pretty much what Seattle CPA said...the IRS has pretty defined guidelines as to what classifies as active vs. passive investing.

If what you're doing is considered active, you have lots of options.  SEP IRA or Solo 401k