JUST WHAT IS AN OWNER-ONLY BUSINESS?

To qualify for “owner-only” STATUS, your business must fall into one of the following categories: 

1. Sole proprietors with no additional EMPLOYEES other than the spouse of the proprietor.

2. Partnerships whose only employees are self-employed PARTNERS and their spouses.

3. Corporations with only one SHAREHOLDER and no employees other than the shareholder and the shareholder’s spouse. 

Thanks to special exemptions granted by the Internal Revenue Service, an “owner-only” business can enjoy all the tax ADVANTAGES of a pension or profit-sharing plan without being required to complete many of the administratively tedious tax forms and paperwork.  In fact, these plans are often as simple to install as an Individual Retirement Account and can be a lot more rewarding.

FLEXIBILITY

While Simplified Employee Pension Plans are usually most attractive to smaller employers, ANY business (including C corporations, S corporations, partnerships and sole proprietorships) can establish a Simplified Employee Pension Plan.  Unlike a qualified plan, a Simplified Employee Pension Plan may even be established after the END of the tax year.  The deadline is the tax filing date of the employer, including extensions.

PARTICIPATION REQUIREMENTS

Businesses may establish ELIGIBILITY requirements for their plans.  The employer may exclude all employees covered by a collective bargaining agreement (if retirement benefits were the subject of good faith bargaining), those under age 21, and employees who have not worked for the employer in at least three of the previous five years (and received more than $450 in compensation for Year 2000). 

SIMPLIFIED INVESTING

Simplified Employee Pension Plans offer administrative simplicity because contributions are deposited DIRECTLY into Individual Retirement Accounts opened by the employees who make the investment decisions.  Since the employee, not the employer, controls the Individual Retirement Account, the need for detailed recordkeeping and reporting is eliminated, and Simplified Employee Pension Plans are completely portable, something much appreciated by employees.

A DISCLAIMER

The articles and opinions in this publication are for general INFORMATION only and are not intended to provide specific advice or recommendations for any individual.  We suggest that you consult your representative, attorney, or accountant with regard to your individual situation.