Federal government websites often end in. The site business plan profit sharing small secure. Printer Friendly Version. Profit sharing plans can be a powerful tool in promoting financial security in retirement.
They are a valuable option for businesses considering a retirement plan, providing benefits to employees and their employers.
A profit sharing plan is a type of plan that gives employers flexibility in designing key features. It allows the employer to choose how much to contribute to the plan out of profits or otherwise each year, including making no contribution for a year.
Who can offer a profit-sharing plan?
Employers start a profit sharing plan for additional reasons:. This booklet highlights some of a profit sharing plan's business plan profit sharing small and some of your options and responsibilities as an employer operating a profit sharing plan. For more information, a list of resources buskness you and for prospective plan participants is included at the end of this booklet.
When you establish a profit business plan profit sharing small plan, you must take certain basic actions. One of your first decisions will be whether to set up the plan yourself or to consult a professional or financial institution - such as a bank, mutual fund provider, or insurance company - to help with establishing and maintaining the plan.
In addition, there are four initial steps business plan profit sharing small setting up a profit sharing plan:. Adopt businesss written plan document - Plans begin with a written citing newspaper article in apa format that smalll as the foundation for day-to-day plan operations.
If you have hired someone to help with your plan, that person likely will provide the document. If not, consider obtaining assistance from a financial institution or retirement plan professional.
In either case, you will be bound by the terms of the plan document. A profit sharing plan allows you to decide within business plan profit sharing small from year to year whether to contribute for participants. Your contributions to the plan can be subject to a vesting schedule which provides that an employee's right to employer contributions becomes nonforfeitable only after a period of time.
You may need to run annual testing to ensure that contributions for rank-and-file employees are proportional to contributions for owners and managers.
Once you have decided on buiness profit sharing plan for your company, you will have some flexibility in choosing the plan's features - business plan profit sharing small as when and which employees can participate in the plan. Other features written into the plan are required by law.
How Profit Sharing Works
For instance, the plan document must describe how certain key functions are carried out, such as how contributions are deposited in the plan. Unless it includes a k cash or deferred feature, a profit sharing plan does not usually allow employees to contribute.
If you want to include employee contributions, see shwring Plans for Small Businesses Publication Arrange a trust for the plan's assets - A plan's assets must be held business plan profit sharing small a trust to assure writing a dissertation tips assets are used solely to benefit the participants and their beneficiaries. The trust must have at least one trustee to handle contributions, plan investments, and distributions.
Since the financial integrity of the plan depends on the trustee, selecting a trustee is one of the most important decisions you will make in establishing a profit sharing plan.]