Scam or Not?

[Tim Resnick]

So i was talking to a guy at my Gym who owns a fencing company. He's up to 47 employees and offers no GROUP Health Plans.

He said he was worried about approaching the 50 employee Remark. He also said he has an idea around this.

SPLIT THE COMPANY in 2.

Ex. Todd's Fencing Company (TF), and LTX company. LTX is a company that handles the interior administrative and Todd's fencing co's, are the employees in the field, sales people, managers, etc.

Stay the same, no benefits, etc.

Would this really work?

Would he be able to pull this off?

(newby question)

~Thanks for your input!

 

[DHK]

Won't work, unless he has no ownership or ties to the 2nd company.

I forget what it's called, but there's some kind of attribution rules of total employees and ownership structure. I remember there being an issue between a McDonald's franchise owner and their small business owner spouse, and they had to provide health insurance for both businesses - even though they were owned separately, their marriage made it require that all employees are covered.

 

[Markthebroker]

Whenever anyone starts a sentence with "I don't know if this is a good idea but..." I cut them off and tell them its a bad idea. If they have to ask if it's a bad idea, it usually is. Then I ask them to go ahead and say what they were going to say before I cut them off. Almost without fail, it almost always turns out to be a bad idea after I let them finish.

It's a very general answer, but I think it's relevant.

 

[leevena]

Splitting the group could work, but it depends on how the ownership is structured. All depends on how the groups are controlled. Too detailed to into specifics on this site, but basics are as follows.

Controlled groups
There are three differentiations, according to the IRS:

Parent-subsidiary: When one or more companies are connected through stock ownership with a common parent corporation/ Eighty percent of the stock of each company is owned by one or more of the corporations in the group and the common parent company owns 80 percent of at least one other company.
Brother-sister: Two or more companies with five or fewer common owners who directly or indirectly own a controlling interest – at least 80 percent of each company – of each group and have effective control – more than 50 percent of the stock of each company.
Combined group: Three or more corporations, each of which is a member of a group of corporations, including parent-subsidiary or brother-sister group.

Keep in mind, this is not for the faint of heart. He will need qualified people to advise if he meets the controlled requirements or if he can have multiple companies and avoid the 50 threshold.