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Retirement Plan Options for Small Businesses

Guest Bobclp

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I am starting a small business and haven't decided between LLC, S-Corp, etc. I may have a couple employees besides myself, or may use independent contractors. Does my choice of entity effect what type of retirement plans I can choose from - 401k, Simple etc?

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Guest Randy Ehle


Yes, the type of organization you have may affect what types of plan you may establish. For example, if you have more than 100 employees, you may not establish a SIMPLE IRA. A 403(B) is for employees of public schools and 501©(3) organizations.

But there are other important considerations to keep in mind, too: do you intend to fund contributions for any employees? Do you want flexibility in those contributions or are you willing to be locked into a certain contribution? Do you want those contributions to belong to the employees right away, or do you want them to be subject to a vesting schedule? How much are you willing to pay for the plan setup, ongoing administration, etc.? How involved do you want to be in the plan? Do you want your employees to be able to contribute to the plan?

A lot of questions, huh? I would recommend talking with several financial advisors and/or plan administrators (perhaps even with a mutual fund company's retirement accounts area) for assistance with these questions. (I say several because that would help you become aware of how knowledgeable they are.)

One website that may prove helpful is Charles Schwab's. They have a Business Retirement Plan tool that asks a number of questions and gives some suggestions about the type of plans to consider. And by the way, I am not in any way professionally attached to Charles Schwab. I have a retail account there, but I work for another brokerage firm. I've been working with Retirement Plans for seven years. I just happen to know about this particular tool (developed by Universal Pensions, Inc.) that is on Schwab's site.

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