Retirement strategies aren't just for large companies. Small companies need them, too. Thankfully, there are several solid retirement plan options for small companies. The one that's best for you and your company depends on factors such as your company's size and type. Here are your options and what businesses they work best with.
Simplified Employee Pension (SEP IRA) – A SEP IRA is going to be your simplest option, as it's painless to set up and doesn't have many contribution limitations. Keep in mind that this simplicity means less features and customizability. The employer funds this plan entirely. It's best for self-employed individuals or businesses of ten employees or less.
SIMPLE IRA – SIMPLE stands for Savings Incentive Match Plan for Employees, which sums it up well. Employers must match all contributions employees make to their own retirement plans, with annual limits upwards of $10,000. It's best for companies of 10-100 employees.
Self-employed 401(k) – To participate in this type of 401(k), you (and your spouse) must be the only employee(s) of your business. For this reason, self-employed 401(k) plans aren't right for self-employed business owners who are planning on hiring employees.
401(k) – The regular 401(k) has the same rules as its self-employed sister, save that you can add employees. There is no limitation stating that only you and your spouse may participate. Employees make up the bulk of contributions, but there are no restrictions against the employer contributing to the plan.
It's never too early to start saving for retirement. The sooner you begin making contributions, the greater the cumulative force of your retirement funds will be. If you're weighing your retirement options as a small business owner, think about speaking with an experienced small business lawyer.
Garland & Mason, LLC is a New Jersey business law firm that handles matters such as business litigation, real estate law and business transactions.
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