Who Can Have a Keogh?

April 13, 2006

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If you operate in the form of a sole proprietorship or a partnership, you're considered "self-employed" and thus eligible to set up a Keogh plan. If your business is incorporated, you're not.

In addition, the following people are also eligible to set up Keoghs:

ministers
Christian Science practitioners
drivers who distribute meat products, vegetable products, fruit products, bakery products, beverages (except milk), or laundry or dry cleaning services
traveling salesmen who work for wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar businesses
home workers

Doctors. A salaried doctor is not considered to be self-employed, even if the "salary" is paid by a corporation owned by the doctor. If, however, the doctor has income from other sources, the doctor could contribute to a Keogh from those other sources.

A doctor receives a salary from the local hospital. She also has income from a book she published and from court testimony as an expert witness. Although she cannot establish and contribute to a Keogh on the basis of the salary she earned from the hospital, she could do so on the basis of the income she earned from the book and from the court testimony.

Consultants. Generally, consultants who receive fees for their services are considered to be self-employed. The rules, however, are less clear for retirees who receive consulting fees exclusively from their former employers. In fact, the courts are split as to whether such a person is self-employed, with the most recent cases finding that such a person is self-employed. Those courts have based their decision on a belief that a person need only hold herself out as available for work to one person (regardless of who that person is) to be regarded as self-employed.