WHAT IS PROFIT SHARING PLAN?
A Profit Sharing Plan is a retirement plan in which the contributions are made solely by the employer. The business owner has the flexibility to contribute and deduct between 0% and 25% of eligible participant's compensation up to a maximum each year. Several allocation methods are available:
Why Provide a Profit Sharing Plan?
Tax-Deductible Contributions
All contributions to a Profit Sharing Plan (up to the allowable limit) are deductible for federal and, in most cases, state income tax purposes. This favorable tax treatment may provide a reduction in your company’s current taxes. If you are self-employed, contributions are deductible on your personal tax return.
Tax-Deferred Growth
All contributions to your Profit Sharing Plan account compound tax-deferred until withdrawn at retirement. Your investment can accumulate more quickly than in a non tax-deferred investment vehicle.
Generous Contribution Limits
You may be able to contribute as much as 25% or up to $49,000, whichever is less, to a Profit Sharing Plan account.
An Attractive Employee Benefit
Small business owners may set up a Profit Sharing Plan as a way to compete with larger businesses for quality employees. This popular and highly visible employee benefit can help you attract and retain the employees you need to succeed in today's competitive business environment. Unlike large company plans, a Profit Sharing Plan is easy to establish and maintain.