Solutions for Business Owners

Tax-Advantaged Accounts for Business Owners

A self-directed small business account at Equity Trust offers you the control and flexibility to choose both traditional and alternative investments.

SEP

Simplified Employee Pension (SEP), is designed for self-employed individuals or small businesses with less than 25 employees. The SEP allows for pre-tax contributions toward retirement without getting involved in a more complex qualified plan such as a 401(k).  Contributions to a SEP are tax deductible and compound tax-deferred until withdrawn, pending that the distribution is taken after the account holder reaches 59 ½ years of age. Additional information related to SEP accounts can be found here.

Advantages:

  • Less complex and costly than a 401(k)
  • Allows individuals to contribute larger amounts
  • May qualify for larger tax deductions
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SIMPLE

Savings Incentive Match Plan for Employees (SIMPLE) is a plan for small businesses, typically with 100 or fewer employees, that have no other retirement plans.  With a SIMPLE plan, contributions are tax deductible and compound tax-deferred until withdrawn, pending that the distribution is taken after the account holder reaches 59 ½ years of age. Additional information related to SIMPLE accounts can be found here.

Advantages:

  • Less complex and costly than a 401(k)
  • Contribution limits are higher than individual retirement accounts and grow tax-deferred, without being subject to capital gains or income tax
  • Employees are always 100% vested in (or, has ownership of) all SIMPLE IRA money
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Solo 401(k)

The Solo 401(k) is for sole proprietors and offers the same benefits of the 401(k), but it is designated for business in which only the owner (and their spouse) is an employee.

Advantages:

  • A retirement savings plan specifically designed for the individual business owner
  • Higher contribution limits for tax-advantaged retirement investing
  • Opportunity to maximize contributions through employee and employer contributions
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Roth Solo 401(k)

The Solo 401(k) has the option to be set-up with the added benefit of Roth-like tax-advantages.

Contribution limits are the same, but you designate them as Roth contributions. Those contributions won’t be eligible for a tax-deduction, but qualified withdrawals from the Roth Solo 401(k) are tax-free.

Advantages:

  • Investments can compound tax-free
  • Higher contribution limits for tax-advantaged retirement investing
  • Opportunity to maximize contributions through employee and employer contributions
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