Due to the complexity of Controlled Groups, it may be instructive to show a few more examples (several are included in the Controlled Groups article).
Example: 3 owners, 3 businesses
Suppose that 3 businesses have the following ownership structure:
Ownership Percentages
Sole-Prop. A
Corp. B
Partnership C
Owner 1
100.00%
79.00%
50.00%
Owner 2
21.00%
30.00%
Owner 3
20.00%
Because Owner 2 and 3 have 0% ownership in Sole-Proprietorship A, their ownership intersts are not considered for any Controlled Group determination involving company A. For example, when company A is paired with Corporation B for testing, we get:
Controlled Group Determination
Ownership Percentages
Common Ownership
Sole-Prop.
A
Corp. B
Owner 1
100.00%
79.00%
79.00%
Owner 2
Owner 3
Total:
100.00%
79.00%
79.00%
Controlling Interest:
Is each column ≥ 80%?
Majority Interest:
Total
> 50%?
TRUE
FALSE
TRUE
Controlled
Group?
NO (at lease one of above tests is false)
The lines for Owners 2 and 3 are blank and are ignored. Because Owner 1 owns less than 80% of company B, A and B fail to form a Controlled Group. Similarly for A and C. Therefore, Sole-Proprietorship A is not a member of any Controlled Group of employers.
There remains the possibility that B and C form a Controlled Group. Again, because Owner 3 has 0% ownership in B, we only consider the ownership interests of Owners 1 and 2 in the test:
Controlled Group Determination
Ownership Percentages
Common Ownership
Corp. B
Partnership
C
Owner 1
79.00%
50.00%
50.00%
Owner 2
21.00%
30.00%
21.00%
Owner 3
Total:
100.00%
80.00%
71.00%
Controlling Interest:
Is each column ≥ 80%?
Majority Interest:
Total
> 50%?
TRUE
TRUE
TRUE
Controlled
Group?
YES (all of above tests are true)
In this case, Owners 1 and 2 own a Controlling Interest in B and C, and they also own a Majority Common Interest, so these two businesses do form a Controlled Group of employers.
Example: 5 owners, 5 companies
Take an example of 5 owners and 5 companies:
Controlled
Group Determination
Ownership
Percentages
Common
Ownership
Employer A
Employer B
Employer C
Employer D
Employer E
Owner
1
20.00%
80.00%
10.00%
50.00%
5.00%
5.00%
Owner
2
20.00%
5.00%
30.00%
5.00%
5.00%
5.00%
Owner
3
20.00%
5.00%
20.00%
10.00%
20.00%
5.00%
Owner
4
20.00%
5.00%
20.00%
15.00%
20.00%
5.00%
Owner
5
20.00%
5.00%
20.00%
20.00%
50.00%
5.00%
Total:
100.00%
100.00%
100.00%
100.00%
100.00%
25.00%
Controlling Interest:
Is each column ≥ 80%?
Majority Interest:
Total
> 50%?
TRUE
TRUE
TRUE
TRUE
TRUE
FALSE
Controlled Group?
NO (at least one
of above tests is false)
Clearly in this example, all 5 do not form a Controlled Group because of the Majority Common Interest test. However, is found that removing Employer B from the test yields a Controlled Group of 4 employers:
Controlled
Group Determination
Ownership
Percentages
Common
Ownership
Employer A
Employer B
Employer C
Employer D
Employer E
Owner
1
20.00%
10.00%
50.00%
5.00%
5.00%
Owner
2
20.00%
30.00%
5.00%
5.00%
5.00%
Owner
3
20.00%
20.00%
10.00%
20.00%
10.00%
Owner
4
20.00%
20.00%
15.00%
20.00%
15.00%
Owner
5
20.00%
20.00%
20.00%
50.00%
20.00%
Total:
100.00%
100.00%
100.00%
100.00%
55.00%
Controlling Interest:
Is each column ≥ 80%?
Majority Interest:
Total
> 50%?
TRUE
TRUE
TRUE
TRUE
TRUE
Controlled Group?
YES (all of
above tests are true)
Further checking reveals one additional combination that forms a Controlled Group: Employer B and D taken together without any other employers:
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