Hi Mark Kohler here with another two-minute tax and legal tip and I'm excited to talk to you about
Retirement plans in your business now. This is a huge topic, and I'm just going to scratch the surface
But I'm excited about this because a lot of business owners. Don't realize that they have options other than just the IRA
There's a lot of cool
strategies and tools you can use in your business to sock away big money and
Limit how much you may put in the plan for your employees so as business owners you want to be informed
the first issue to consider is how you're organized as a business you want to know that your options are gonna vary and the
Ability to put away better money in a tax preferred way is gonna
Be based on how you're structured as a business a sole proprietorship or an LLC
Taxed as a sole proprietorship, or if you're an S
corporation with that salary dividend split strategy watch one of my other videos on that topic
So make sure that you're considering how you're structured and how much profit you're making as you analyze which
Structure for your retirement plan is best for you
Now honestly your first option even though. I poop hudud earlier
Is that of an IRA an?
individual retirement
account now if you're only gonna put away four or five thousand dollars during the year then go with the IRA the IRA is a
Great place to get started building a little bit of a retirement account
And you could always roll it into a more aggressive strategy
Whether it's a SEP or a 401 K later
But start saving something even if it's a few hundred bucks a month and begin with the IRA now as a business owner
You've got two or three other options if much better than an IRA to put money way in a tax preferred manner
Now the first options are your set or simple now, that's gonna help you in a sole-proprietorship
Type structure to put away somewhere between five to twenty thousand dollars or more now you're gonna
generally put away 25% of your net income into these SEP or simple accounts which are like a
supercharged two IRA now
They're not great because you can only put away a percentage of your net income and you're gonna pay a lot in
Self-employment tax to get there, but if you're only making twenty to thirty or forty thousand dollars in your business
And you haven't yet become an S corporation
Look at the simpler set and it could be a great next step in your retirement building process
now the third option, which I love is the solo 401k or
401k with safe harbor provisions if you have other employees
And what's cool about the 401k is you can really start socking away a lot more money with the S corporation strategy
So you're paying less and FICA or self-employment tax, but you're allowed to put away a lot more than a separ simple in a tax
Efficient manner so you get this head start on a separ
And you keep your salary lower, so you're paying less FICA
Well if you start to crunch the numbers it gets powerful
So I love the 401k for this this method and you can get 401 k's a lot more affordably
Established nowadays for the small business owner so look at the 401 k is your third option
now for my business owners making big money the fourth option is the pension plan or
DB plan defined benefit plan these are awesome for business owners making big money
and you add it on top of your 401 k structure now if you have other employees you're gonna have to factor that into the
Equation and look at safe harbor provisions and cliff provisions, and how much do you really want to put away for your employees?
But it's gonna allow you to put a lot of money away in a tax
Deferred manner inside your business far beyond the IRA or separate simple
equation so start meeting with your financial advisor
and your tax advisor to see which structure fits you best to put away the most money that you can and
Get a tax deduction for it. I love this and it's gonna help you better. Live your American dream
Thanks for listening, and I hope that information was helpful and let me speak from the heart here
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