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Tax Attorney Discussion: Partnership’s Assumption of Liabilities

As a tax attorney and business attorney, John McGuire frequently works with a partner within a partnership who contributes property to a Denver Business Attorneypartnership such as an LLC and the partnership assumes the liability on the property.  When this occurs, a tax attorney will advise the contributing partner that their basis is decreased by the sum of the liabilities assumed.  Furthermore, a partner’s basis is increased by their share of the partnership liabilities.  The examples below should help illustrate this piece of tax law.

For example, assume Joe and Mike form a partnership. Joe contributes property with a basis of $100,000 that is subject to a debt of $60,000, and has a fair market value of $150,000.  Mike contributes property with a basis of $40,000 and fair market value of $60,000.  Further, assume Joe and Mike are equal partners, each holding a 50% ownership interest in the partnership.  Joe’s adjusted basis would be $70,000, calculated: $100,000 basis plus $30,000 share of the $60,000 liability assumed by the partnership less the $60,000 liability ($100,000 + $30,000 – $60,000= $70,000).  Mike’s adjusted basis would be $70,000 as well, calculated: $40,000 basis plus $30,000 share of the $60,000 ($40,000 + $30,000).

Under the regulations for IRC Section 722, the tax basis of a partnership cannot be negative.  Therefore, if the liabilities assumed by the partnership exceed the contributing partner’s basis in the property the excess is treated as a distribution of cash.  For example, if Joe had an adjusted basis of $100,000 in property he is contributing to a partnership, with a $150,000 liability that is assumed by the partnership, the $50,000 of liability in excess of Joe’s basis would be treated as a cash contribution from the partnership to Joe.

Some partner’s have attempted to contribute a promissory note to the partnership to prevent the debt assumed by the partnership exceeding their adjusted basis in the contributed property.  The contribution of a promissory note to the partnership does not increase the contributing partner’s basis under IRC Section 722 because the basis in the promissory note would be $0.

The partnership will have a carryover basis and thus the basis in the hands of the contributing partner will be the partnership’s basis in the property contributed.  Further, the partnership’s holding period for the property contributed will include the contributing partner’s holding period if the property contributed is a capital asset or is IRC Section 1231 property.

Individuals forming a partnership or contributing property to a partnership should consult with their business attorney and/or their tax attorney to discuss the tax implications to their partnership interest and to the partnership.

Contact The McGuire Law Firm to schedule a free consultation with a tax attorney or business attorney in Denver.

IRC Section 752 Regulations Article by Denver Tax Lawyer

The 752 Regulations are used in determining a partner’s economic risk of loss for partnership debt.  These regulations apply a test Denver Tax Lawyerto determine economic risk of loss by reviewing what the economic consequences would be to each partner if the partnership liquidated.  Thus, the partners risk is examined as if the partnership went through a “constructive liquidation.”  A tax attorney at The McGuire Law Firm is familiar with these regulations and their application.  The article below should help provide additional information.

Under this applicable constructive liquidation, the 752 Regulations hold that the following are deemed to have occurred:

–         All partnership liabilities are payable in full;

–         All partnership assets (including cash) have no value with the exception of partnership property that was contributed to secure a partnership debt or liability;

–      The partnership disposes of all partnership property in a taxable transaction but receives no consideration, but receives relief from certain debts of which the creditor(s) right to repayment is limited to one or more partnership assets;

–     All allocable items such as gain, income, deductions, losses are allocated amongst the partners;

–          The partnership is liquidated.

The 752 Regulations can be difficult in their application to Limited Liability Companies (LLCs) due to the fact that in general no member or partner of the LLC is liable for the debts of the LLC regardless of whether the LLC debt is deemed recourse or nonrecourse debt.  Therefore, most partnership debt should be considered nonrecourse.  Exceptions apply if a member/partner agrees to assume a separate obligation for the liability apart from the partnership (LLC), or if a partner guarantees more than 25% of the interest that would accrue on a nonrecourse partnership liability and it can be deemed with reasonable certainty that the partner will be required to pay the interest that was guaranteed.  If a partner provides their property, other than their partnership interest as collateral to secure a partnership debt, the liability would be treated as recourse.  Moreover, debts of the LLC partners that were recourse prior to the formation of the LLC retain the classification of recourse debt.  Most state LLC statutes provide that a conversion from a partnership to an LLC does not provide relief from liability to those that had previously guaranteed a debt.  Thus, the prior partnership liabilities would be treated as recourse liabilities under I.R.C. Section 752.

Most state law statutes regarding creditors rights against an LLC only allow the creditor to pursue the assets of the LLC, and no right to the assets of the individual LLC members.  Therefore, such debts would appear to constitute nonrecourse debts to the LLC members for purposes of Section 752, and is supported by the prior 752 temporary regulations.

A tax attorney and business attorney from the McGuire Law Firm can work with partnerships and LLCs, in addition to the individual partners regarding partnership issues from formation and taxation to the sale and transfer of partnership interests.

Contact The McGuire Law Firm and schedule a free consultation with a tax attorney in Denver.

 

Recourse and Nonrecourse Debt in an LLC by Tax Attorney

Recourse and Nonrecourse Debt in an LLC Denver Business Attorneys

As a tax attorney and business attorney, John McGuire of The McGuire Law Firm works with partnerships regarding the impact of partnership debt and the impact of recourse and nonrecourse debt.  The article below outlines law to consider regarding partnership debt.  If you have a question regarding partnership debt, contact The McGuire Law Firm to speak to a Denver tax attorney or business attorney through a free consultation.

Whether or not debt within a Limited Liability Company (LLC) is recourse or nonrecourse can have a profound impact on certain partners within an LLC.  Whether debt is recourse or nonrecourse in the eyes of the Internal Revenue Service is determined by partners actually bearing the risk of economic loss.  Under subchapter K of the Internal Revenue Code, all LLC debt, regardless of how the debt is labeled, is treated as nonrecourse debt under an economic risk analysis.

An LLC debt is considered not recourse debt under the following circumstances:

–          A member of the LLC or person related to the applicable member guarantees or makes a loan to the LLC;

–          Separate state law obligations to a member(s) exists (a member is liable for the recourse debts of a previous partnership);

–          The debts falls under the interest guarantee rule of Regulations Section 1.752-2(e) or the property pledge rules of Regulation Section 1.752-2(h); or,

–          The anti-abuse rule applies under Regulation Section 1.752-2(j).

When analyzing a partner’s share of partnership liability, the 752 Regulations first consider whether the debt is recourse debt or nonrecourse debt.  Under Regulation Section 1752-2 a debt is recourse to a member of an LLC if that member (partner) bears the risk of economic loss for the applicable liability.  The debt is nonrecourse if no member or partner bears the risk of economic loss.  If partner has an obligation to make a contribution to the partnership or to pay a creditor upon liquidation of the partnership, the partner would bear the risk of economic loss to the extent of the obligation.  For example, if a partner guaranteed the partnership’s nonrecourse liability, such partner would have an obligation upon the constructive liquidation of the partnership and bear the economic risk.  Therefore, such liability would be a recourse debt to the partner.  Moreover, if the partner acted as lender, and loaned money to the partnership as a nonrecourse liability to the partnership, such partner would be considered to bear the economic risk of the loan.

Under the 752 Regulations, the owner of a disregarded entity is treated as bearing the economic risk for obligations of the disregarded entity, to the extent of the disregarded entity’s net value on the date the partnership determines  the partner’s share of the liability.

A tax attorney and business attorney at The McGuire Law Firm can assist you regarding partnership debt, basis, formation, structure, operating agreements, taxation issues, allocable shares to partners, transfer or sale of partnership interests and other partnership issues.

Contact The McGuire Law Firm and schedule a free consultation with a tax attorney in Denver or Golden.

 

5 Reasons to Hire a Denver Business Attorney

  1. Denver Business AttorneyA business attorney can help you form the proper entity or entity structure based upon the needs of your business. Further, through this process, your business attorney can explain to you the different liability protections afforded different entities and the different tax implications to the business and business owners based upon the choice of the business entity.  For example a C Corporation, S Corporation and Limited Liability Company (LLC) are all treated differently for tax purposes, and a fundamental understanding of the taxation of your business entity is a must to properly run and operate your business.  Further, your business attorney can explain the individual income tax issues that you as the business owner will need to consider.  Our Denver tax attorneys strive to educate our clients so they are aware of the tax implications created by their choice of entity.
  2. How should your business be financed?  Do you want more debt or equity interests in your business?  Your business attorney can help you understand what constitutes debt and equity, and the good & bad behind both debt and equity financing.
  3. Did you read and understand your lease agreement?  A business should always hire a business attorney to review and negotiate their lease agreement.  The vast majority of lease agreements are very “one-sided” in favor of the landlord and a business attorney may be able to help you negotiate more reasonable terms, as well as explain the terms of the lease agreement and your personal exposure to the lease agreement as an owner and likely guarantor of the lease agreement.  Buckingham & McGuire, LLC has business attorneys in Denver to assist with the review and negotiations of your lease agreement.  Our Denver business attorneys work to educate our clients regarding the pertinent lease provisions and protect our clients interest through the successful negotiating of certain provisions.
  4. You’ve heard the saying that death and taxes are the only 2 certainties in life.  While this may be true, if you own a business, there is also the certainty that as at some point during your life or at your death, you will need to sell, dispose of or otherwise transfer your business interests.  A Denver business attorney can help you establish a plan regarding the transfer or sale of your business or business interests in a manner that is most beneficial to you regarding your exposure to liability and in regards to the taxation of the transfer or disposition.  Your business attorney can also help in regards to the drafting of the purchase agreements and the necessary negotiations with the parties involved.
  5. As a business owner, you may want to establish retirement accounts for yourself and your employees.  A business attorney can assist you regarding the different options and tax benefits, as well as the reporting requirements for such compensation plans.

Contact The McGuire Law Firm to discuss your business issues with a business attorney!  Free consultation with a business attorney!

The Complete Liquidation of a C Corporation

The Complete Liquidation of a C Corporation Denver Business Attorney

Many business owners and shareholders of corporations will ask their tax attorney and/or business attorney, “what is a complete liquidation, and what are the tax implications to the C Corporation and the shareholders upon a complete liquidation?”  I always find it interesting, maybe even ironic that the term “Complete Liquidation” is not defined in the Internal Revenue Code, and nor is it defined in the applicable Section 331 regulations.  However, Federal Tax Regulations § 1.332-2(c) holds:

A status of liquidation exists when the corporation ceases to be a going concern and its activities are merely for the purpose of winding up its affairs, paying its debts, and distributing any remaining balance to its shareholders.  A liquidation may be completed prior to the actual dissolution of the liquidating corporation.  However, legal dissolution of the corporation is not required.  Nor will there mere retention of a nominal amount of assets for the sole purpose of preserving the corporation’s legal existence disqualify the transaction.

IRC § 346(a) also allows for a series of distributions that are pursuant to a plan of liquidation to constitute a formal liquidation of the corporation.  Therefore, it is apparent that a complete liquidation can occur without a formal dissolution and through a series of distributions.  The United States Tax Court generally applies a three part test in determining whether there was a plan to liquidate: 1) Was there a manifest intent to liquidate; 2) Was there a continuing purpose to terminate corporate affairs and dissolve; and, 3) Were the corporate affairs confined and directed to the purpose of liquidation.

Substance over form will control the analysis of whether a corporation has completely liquidated, and the facts will control this analysis.  If distributions are made to shareholders of the corporation before there is sufficient evidence to prove there was actual intent to liquidate the corporation, these distributions are likely to be treated as dividends in the eyes of the Internal Revenue Service as opposed to capital gain.

Shareholders receive a benefit through the complete liquidation because under IRC § 331(a), the amounts received by the shareholders are considered full payment in exchange for their stock, and therefore the shareholder receives capital gain treatment as opposed to a dividend distribution.  As a capital gain, the shareholder is able to use their basis in the stock to offset or lower the capital gain.  Further, this capital gain realized by the shareholder can be offset or lowered if the shareholder has other capital losses.

The earnings and profits of the corporation vanish when the corporation completely liquidates, whereas prior to the liquidation, the amount of the corporate earnings & profits was a figure that would have measured dividend distributions to the shareholders and had thus far, not been taxed at the individual level.   Therefore, when a corporation completely liquidates, the earnings and profits of the corporation “escape” taxation as dividend distributions to shareholders.

As a Denver tax attorney and business attorney, John McGuire of The McGuire Law Firm can assist corporations and shareholders regarding complete liquidations and the tax implications to the corporation & shareholders.

Contact The McGuire Law Firm to schedule your free consultation with a tax attorney and business attorney in Denver!

Effect of a Deficit Restoration Obligation by Tax Attorney

Effect of a Deficit Restoration Obligation Denver Business Attorney

A deficit restoration obligation is a partner’s unconditional obligation within a partnership agreement to restore any deficit balance in their capital account when the partnership liquidates.  The presence (or absence) of a deficit restoration obligation within a partnership agreement impacts which partners can be allocated losses & deductions generated by a partner’s equity or partnership recourse debt, but also the allocation of partnership liabilities under I.R.C. Section 752.  A Denver business attorney and tax attorney at The McGuire Law Firm assist partners and partnerships regarding partnership agreements including deficit restoration obligations within a partnership agreement.

 

Allocations within a partnership agreement are respected to the extent that the allocation has substantial economic effect or are made in accordance with the partner’s partnership interest.  When reviewing an allocation and the substantial economic effect, the 704 Regulations apply a three-part test.  As part of this test, capital accounts must be maintained in accordance with the 704 Regulations, liquidating distributions must be in accordance with positive capital account balances and each partner must have a deficit restoration obligation.

 

Under the 704 Regulations the value of property is assumed to be the basis of the property and not the actual fair market value of the property.  Further, stacking rules deem deductions to be funded first by those with the least rights to receive proceeds upon the sale of the assets.  In general, lenders or creditors have a higher priority right than do owners.  Thus, deductions that are generated from a partnership are considered to have first come from the partner’s equity (lower priority) than from partnership debt (higher priority).  The equity deductions can generally be allocated amongst the partners to the extent that such deductions do not create a negative capital account balance for the partner in excess of the partner’s actual or deemed obligation to make contributions to the partnership upon the liquidation of the partnership.  Therefore, when a partner agrees to a deficit restoration obligation within the partnership agreement, the partner is more or less allowed to be allocated a deduction that can be attributed to other partner’s equity.

 

For example, John, Mike & Joe form an LLC.  John and Mike contribute $50 each and Joe contributes $25.  The LLC purchases an asset with the $125.  The partnership agreement holds that profits are to be allocated per the monies contributed, but that losses are to be allocated 1/3 to each partner.  If Joe agrees to a deficit restoration obligation, he can receive the 1/3 allocation of the partnership’s net equity losses.  If Joe does not agree to the restoration, he can only receive his pro-rate share (20%) of the partnership’s net equity losses.

 

A Denver tax attorney at The McGuire Law Firm can assist you and your partnership regarding partnership taxation and transaction issues.

 

Contact The McGuire Law Firm to discuss your tax and/or business questions!  Free consultation with a tax attorney and business attorney!

Transfers of Property to a Corporation In Exchange for Stock

Transfers of Property to a Corporation In Exchange for Stock Denver Business Attorney

A Denver tax attorney and business attorney at The McGuire Law Firm can assist clients with the formation and structure of corporations.  The article below outlines the tax implications when contributing property to a corporation in exchange for stock.

Many business owners inquire as to their gain or loss recognition when contributing property to a corporation in exchange for stock, as well as the implications to the corporations.  While certain business transactions may require the recognition of gain or loss, it is possible for gain or loss to be avoided.

 

In general, a corporation does not recognize gain or loss upon the issuance or sale of its own stock under IRC Section 1032.  Although, IRC Section 1001 treats the transfer of property for stock in a corporation as a sale where gain or loss is recognized under IRC Section 1002, IRC Section 351 may be able to avoid this gain recognition.

 

For IRC Section 351 to apply one or more persons must transfer property to a corporation; the transfer must be solely in exchange for stock in such corporation; and, the transferors must control the corporation immediately after the transfer and “control” is defined as 80% or more under IRC Section 368(e).  If Section 351 does not apply, gain or loss will be recognized under Section 1001.  Furthermore, Section 351 is mandatory and not an election.

 

The statute does not define “property” but “property” includes cash as well as tangible and intangible property.  Regarding intangible property, if the property has value separate and apart from the existence of the business, it is considered property.  It is important to note that services are not considered property; however, the stock issued for the performance of services does not necessarily cause the transfer to fail to qualify as a Section 351 transfer.  Under such circumstances the person receiving the stock for the performance of services is not counted or considered when the 80% control requirement is calculated.

 

If non-qualified preferred stock is issued by the corporation, this non-qualified preferred stock is treated as “boot” for purposes of gain when received in exchange for property that is transferred to a controlled corporation.

 

The Receipt of “Boot”

 

If a shareholder (transferor) receives money or property in addition to the stock, this money or property is considered “boot.”  If a shareholder does receive boot through the transaction, gain is recognized at the lesser amount of the realized gain or the boot received.   The receipt of a short term note or certain stock rights and warranties would be considered boot, but debt is not considered boot although it would lower basis.

 

Contact a tax attorney and business attorney at The McGuire Law Firm to assist you with the formation and structure of business entities as well as the tax implications to the business & business owners.

 

You can schedule a free consultation with a small business attorney in Denver by contacting The McGuire Law Firm.    John@jmtaxlaw.com

 

 

Partnership Basis by Denver Tax Attorney and Business Attorney

Partnership Basis Denver Tax Attorney

A Denver business attorney at The McGuire Law Firm can assist business owners in understanding their ownership interest in their business and how such value can impact their tax consequences upon sale or transfer.  The article below has been drafted by a business attorney to discuss a partner’s basis in their partnership interest.

Just as your basis in a share of stock is important for determining gain or loss upon the sale of that stock, a partner’s basis in their partnership interest is important in determining gain or loss after sales, exchanges or distributions, and also when computing certain basis adjustments.

A partner’s basis in a partnership interest acquired by contribution is the sum of the money contributed and the adjusted basis of any property contributed.  However, if gain is recognized, the partner does not receive an income in basis for the amount of the gain recognized under Internal Revenue Code Section 731.  The contribution of promissory note by a partner does not increase the partner’s basis because Under IRC Section 722, the partner has a basis of zero in the note.  When losses or deductions are passed through from the partnership to the individual partners, a partner’s distributive share of the partnership loss or deduction is deductible only to the extent of their basis at the end of the taxable year under IRC 704(d).  If a partner has disallowed losses, these losses are carried forward until the partner has sufficient basis to take the loss, which is stated under Regulation 1.704-1(d).

A partner’s basis within the partnership is adjusted as the partnership operates and income & losses are distributed to the partner.  A partner’s basis will increase under IRS Section 705 by the sum of the distributive share for the taxable year and prior taxable years regarding the following items: taxable income to the partnership; income of the partnership exempt from tax; the excess of the deduction for depletion over the basis of the property subject to depletion; and, additional capital contributions.  A partner’s basis will decrease under IRC Section 705(a)(2) (but not below zero) by distributions from the partnership (property or monies) and by the sum of the partner’s distributive share for the taxable year and prior taxable years for losses of the partnership and expenditures of the partnership not deductible in computing taxable income & not properly chargeable to capital (meals & entertainment).

When individuals are considering forming a partnership and contributing money and/or property, it is advised that the partners or the partnership consult a tax attorney or business attorney regarding the importance of basis and adjustments to basis.  Because a partner’s basis “follows” the partner it is important to correctly and accurately track each partner’s basis, and for the partner’s to understand how certain transactions can impact their basis.

A Denver business attorney and tax attorney at The McGuire Law Firm can assist clients regarding partnership transactions and partnership issues including: formation, contribution of property, partnership taxation, allocation of partnership items, purchase or sale of partnership interests and other transactional matters.

Schedule a free consultation with a business attorney by contacting The McGuire Law Firm!

 

Liquidating Distributions & Shareholder Gain or Loss by Denver Business Attorney

Liquidating Distributions & Shareholder Gain or Loss Denver Tax Attorney

At The McGuire Law Firm, a Denver business attorney and tax attorney can assist you with all types of business transactions from formation to sale.  The article has been drafted by a tax attorney to discuss liquidating distributions from a corporation and tax consequences to the individual shareholders.

When a corporation liquidates, generally the monies due to the corporation are collected, corporate debts are paid and then cash and/or property is distributed to shareholders per their ownership interest in the corporation.  These distributions of cash and/or property are considered liquidating distributions and are likely to receive different treatment than if distributed to a shareholder when the corporation was operating and intended to continue such operation.

Under IRC § 331(a), the amounts received by a shareholder through the complete liquidation of a corporation are treated as full payment in exchange for the shareholder’s stock.  Therefore, the shareholder is afforded capital gains treatment regarding the liquidating distribution(s) assuming the stock is a capital asset under IRC § 1221, which it usually is.

As a capital gain, the amount of gain or loss will be determined by the shareholder’s basis in his or her stock, and whether the gain or loss is short term or long term will depend upon the shareholder’s holding period.  If a shareholder owes a debt to the corporation and the debt is cancelled through the liquidation, the amount of debt owed by the shareholder is also treated as a liquidating distribution.  The shareholder’s gain or loss must be computed on a per-share basis and therefore, gain or loss is calculated separately when stock was acquired a different times and for different prices.

When a shareholder receives multiple liquidating distributions, the shareholder can apply all of their basis first before reporting gain or loss.  Therefore, shareholders may be able to defer the recognition of gain for multiple tax periods or years when they receive multiple liquidating distributions.  In regards to recognizing a loss through multiples distributions, the loss is not recognized until the final distribution is received by the shareholder.  If a shareholder is receiving payments from a third party note received by the corporation in a liquidating sale, the shareholder may be able to use the installment method when reporting gain.

The shareholder’s gain or loss will be the difference between the adjusted basis of their stock and the fair market value of the liquidating distribution.  While the fair market value of cash distributed to a shareholder in a complete liquidation may be easily ascertained, issues arise when property is distributed to a shareholder through a complete liquidation.  Appraisals may be necessary for certain tangible assets, but appraising certain intangibles may prove futile.  If the value of certain assets cannot be ascertained with reasonable accuracy, the calculation with respect to these assets is left open until the assets are sold to a third party or an ascertainable value is available.

A Denver, CO tax attorney and business attorney at The McGuire Law Firm can assist clients regarding the liquidation of corporations and tax treatment.

Contact The McGuire Law Firm to schedule a free consultation with a Denver tax attorney or business attorney!

Compensation Planning: Types of Qualified Plans by Denver Tax Attorney

Compensation Planning: Types of Qualified Retirement Plans Denver Business Attorney

Compensation planning can be very important for business owners both individually and as a means by which to maintain the services of employees.  As a Denver business attorney and tax attorney, John McGuire works with businesses to create and implement compensation plans.  A Denver tax attorney can also assist you with the tax implications of certain plans and other tax issues.

There are multiple types of qualified retirement plans that can be submitted to the IRS for qualification.  A qualified plan is a plan that has met the requirements of the code, regulations and other pronouncements to receive tax exempt status.  The most important tax advantages of a qualified plan are: 1) the employee does not include in their gross income their interest in the employer contribution or the income earned by the trust fund until the employee receives funds from the plan; 2) the employer may deduct contributions to the plan; 3) the earnings of the plan are exempt from tax while held in the trust; 4) certain distributions may be eligible for special income tax treatment.

Defined Benefit Plans

Defined benefit pension plans are plans where the employer provides payment of definite and determinable benefits to employees over a period of years.  Usually benefits are paid to employees for their life after retirement.  The benefits received by the employees in retirement are usually measured by factors such as years of service to the employer and compensation received by the employer.  There are three general types of defined benefit plans: 1) Fixed benefit formula providing a fixed amount of benefits that is unrelated to years of service by the employee or the employee’s earnings and compensation 2) Flat benefit formula providing retirement benefits equal to a fixed percentage of the employee’s salary regardless of the time of services; and 3) Unit benefit formula that provides the employee with retirement benefits at a specific percentage of each years average or actual compensation paid to the employee multiplied by the years of service.

Under ERISA the employer is usually required to make annual payments into the trust that would be necessary to fund the benefits.  The benefits of the plan are partially guaranteed by the Pension Benefits Guaranty Corporation.  Defined benefit plans promise employees very specific benefits at retirement.  No individual accounts are created for the individual employees and no assets are separated from within the plan.

Defined Contribution Plans

Defined contribution plans hold individual accounts for each participant in the plan and for benefits based on the amount the participant contributes to their account.  There are three types of defined contribution plans: 1) Profit sharing plans are established and maintained by employers providing a share of the employer profits with employees.  Contributions can be determined by the employer or based upon a fixed equation or formula.  The plan must provide a specific pre-determined equation or formula for the allocation of contributions that are made to the plan by the plan participants; 2) Stock bonus plans are established and maintained by the employer providing similar benefits to a profit sharing plan, but the benefits are distributable in stock of the employer company; 3) Money purchase plans are a defined contribution plans with individual accounts similar to profit sharing plans.  The amount of the annual contribution is determined by applying a specific equation or formula.

Employers considering the creation of a qualified retirement plan should consult with their business attorney and tax attorney regarding their obligations to the plan and the tax implications to their business.

Contact The McGuire Law Firm to speak with a business attorney or tax attorney