Keep Your Tax Advisors In The Loop

Entrepreneurs quickly learn that every business financial decision has a tax implication. Since most entrepreneurs are not trained accountants or tax experts, they generally depend on the guidance of a CPA for accounting and tax services and for overall general business advice.


Entrepreneurs who use retirement money as a source of business capital have unique issues they face which often conflicts with the traditional advice provided by most CPAs. This is because most CPAs have not received specialized retirement plan training. Additionally, entrepreneurs often do not fully inform their CPAs about having a retirement plan as an investor in their business which can lead to tax return filling errors. A client of ours had experienced problems with her CPA in many areas. One item in particular caused such a significant conflict between her corporation and her retirement plan that it could have led to the retirement plan’s investment in her corporation to become subject to tax and penalty. Walker Business Advisory identified the existence of the problem and then guided her CPA on how to correct the problem.


This service was provided at no additional cost.


Entrepreneurs who use ERPA gain the benefit of having a team managing the plan that understands not only the needs of business owners but also the unique issues associated with having a retirement plan as an investor.

Form 5500 Reporting

For those that are invested in the Qualified Employer Securities (QES), you are required to have a stock value calculation pre-pared after 12/31 of each year for Form 5500 reporting purposes. When a private investment such as the QES is held by your plan this is the only way to value that investment since it is not based on publicly traded stock.

The completed Stock Value Calculation should be sent to us no later than 6/30 of each year so that we have time to prepare the Form 5500 filing that is due by 7/31 of each year. The IRS, Department of Labor, and Pension Benefit Guaranty Corporation jointly developed the Form 5500-series returns for employee benefit plans to satisfy annual reporting requirements under ERISA and the Internal Revenue Code.

Reminders will send out  after the first of each year to let you know it’s time to start preparing to submit your paper-work to the valuation company that you plan to use.

Using A LLC With ERPA

There has been some confusion about the use of a LLC in conjunction with The Entrepreneur Retirement  Plan of America (ERPA).  LLCs are limited liability entities and are generally considered as pass through entities for tax purposes with some attraction for particular situations. They do not qualify, however, in transactions contemplated by ERPA  type transactions. Qualified plans can, in most all cases, lend or invest in C type corporations.

There are situations where a LLC can be utilized as part of the structure but it is not advisable for someone to use their qualified plan to capitalize the C corporation and then the C corporation to fund the LLC. There is a rule known as substance over form and there is a real possibility this structure will fail the test and thus disqualify the transaction resulting in a deemed distribution subject to taxes and penalties. Walker advisory reviews every tax return for clients using ERPA. We have come across situations where the client has changed from the C Corp. to the LLC at the recommendation of his/her CPA!! Astounding!!

One further note; LLCs can be subject to higher taxes in some respects and are somewhat inflexible for long term planning purposes. LLCs work extremely well in other situations so make certain that your tax professional is aware of your entire situation before using a LLC as part of your business structure.

You are welcome to contact us with your questions about how you may use your retirement account (IRA, 401k, 403b, 457 and other qualified retirement plans) to buy a business.