Using a 401k to Help the Small Business Owner

A well structured 401k plan can be a major plus for your future financial security — even when you’re the owner of the company.

Assets that stay in the business’s name are subject to liability lawsuits, tax liens, or claims for other owners.  Money that you take out, though, isn’t always deductible, and is subject to taxes.  That’s where having a 401k for your business can help you substantially.

Consider the advantages for you:

  • 401k contributions are a business deduction, the same as any other compensation.  The difference is that the recipient doesn’t have to pay taxes on the money either, until they withdraw funds for retirement.
  • Retirement funds are generally shielded from bankruptcy.
  • 401k’s allow for loans, which aren’t taxable if they get paid back (this is a major difference from a SEP-IRA, which is common for very small businesses, but doesn’t allow for loans)
  • You can put in up to $52,000 in the account in 2014, if structured correctly (another difference from the SEP-IRA, which has much lower limits)
  • In certain circumstances, 401k accounts can also be set up for your dependents
  • The 401k is also an excellent retention tool for your employees

Setting up a 401k can be a maze of regulations and compliance issues, as well as hidden costs.  If you’d like to harness the advantages of this program for your business, give us a call and OEM can help you do it, painlessly!

This posting is for general information purposes, and is not a substitute for qualified legal or financial advice.  Please consult with a professional before making specific decisions about your own set of circumstances.

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