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Author: Helter Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76384  
Subject: 401(k) funding by corporation Date: 9/30/1998 8:17 AM
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I've already posted this on the self-employed fools board, but not received a response yet :), so I thought I'd try you guys: I'm about to start my own corporation(I'll be the only employee), I understand that I can start a 401(k) and it can take 30k per year. Also, the personal contribution is a maximum of 10k. Right now, My FICA taxes are calculated using my total salary including the 10k, can my corporation fund the full 30k without me contributing at all - and are contributions by a corporation into a 401k done with before or after corporate income tax dollars?

Also, the same before/after tax question for company pension plans. And who do I talk to - any ideas for creating one of them.

My company will have between 250 and 300k revenue per year(if things go as expected) and I'll be the only person working for it - I'd like to avoid as much taxation as possible. For reference - I'm only 26 - gotta love software!
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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5743 of 76384
Subject: Re: 401(k) funding by corporation Date: 9/30/1998 1:54 PM
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Helter writes (in part):

My company will have between 250 and 300k revenue per year(if things go as expected) and I'll be the only person working for it - I'd like to avoid as much taxation as possible. For reference - I'm only 26 - gotta love software!

I reply:

I don't know the answers to your questions, Helter, but this board is a good place to get them. I'm writing to urge you to get legal advice (if you haven't already) when setting up your corporation and to review your (consulting?) contracts. The revenues you're discussing are well worth the investment. Local bar associations are a good starting point if you don't know any lawyers you trust. If you want to take a chance ;-), e-mail me your area of the country, and I'll see whom I might find. --Bob

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Author: Helter Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5745 of 76384
Subject: Re: 401(k) funding by corporation Date: 9/30/1998 5:19 PM
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I'm in the Philadelphia area, I've got the contract here and it looks pretty simple, but I suppose that's scary :) Also, I know some other people who have worked through the same agency.

I was planning to get a CPA, do you really think a lawyer is necessary as well?

I've already sent off to create myself a PA S-Corporation based on the feedback that others received from their CPA's.

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Author: cameron One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5748 of 76384
Subject: Re: 401(k) funding by corporation Date: 9/30/1998 6:07 PM
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I'm in the Philadelphia area, I've got the contract here and it looks pretty simple, but I suppose that's scary :) Also, I know some other people who have worked through the same agency.

I was planning to get a CPA, do you really think a lawyer is necessary as well?

I've already sent off to create myself a PA S-Corporation based on the feedback that others received from their CPA's.


I strongly recommend that you hire an attorney if you are starting a new corporation and entering some kind of business contract. You may think it's a pain to pay the fees, but you want to make sure that you protect yourself from liabilities that might arise from the business. There are many issues that you probably haven't thought of, not because you're unintelligent, but because this is not your area of expertise. Hiring an attorney would be money well spent, IMHO.

Cameron

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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5753 of 76384
Subject: Re: 401(k) funding by corporation Date: 9/30/1998 6:30 PM
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Greetings, Helter, and welcome. You asked:

I've already posted this on the self-employed fools board, but not received a response yet :), so I thought I'd try you guys: I'm about to start my own corporation(I'll be the only employee), I understand that I can start a 401(k) and it can take 30k per year. Also, the personal contribution is a maximum of 10k. Right now, My FICA taxes are calculated using my total salary including the 10k, can my corporation fund the full 30k without me contributing at all - and are contributions by a corporation into a 401k done with before or after corporate income tax dollars?

Also, the same before/after tax question for company pension plans. And who do I talk to - any ideas for creating one of them.

My company will have between 250 and 300k revenue per year(if things go as expected) and I'll be the only person working for it - I'd like to avoid as much taxation as possible. For reference - I'm only 26 - gotta love software!


Bob78164 suggested you seek the services of an attorney in setting up the corporation. To that I would add that you seek the services of a Certified Financial Planner skilled in retirement plans for small businesses to help you set up the right kinds of plans for you. Your income seems to justify it, but you're talking both defined benefit and defined contribution plans in your questions. You need to sit down with a skilled professional to discuss the various pros and cons of the vehicles available to you. There are several approaches that can be taken, and they have different results and costs.

Trust me…..It will be money well spent for what you're trying to do.

Regards…..Pixy



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Author: shess Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5778 of 76384
Subject: Re: 401(k) funding by corporation Date: 10/2/1998 1:04 PM
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cameron wrote:
<<I strongly recommend that you hire an attorney if you are starting a new corporation and entering some kind of business contract. You may think it's a pain to pay the fees, but you want to make sure that you protect yourself from liabilities that might arise from the business.>>

Beyond that, for a businessperson having a relationship with a lawyer and a CPA is useful for the same reasons that having a relationship with a physician is useful for health concerns. You don't want to have to vet a lawyer at the point you _need_ a lawyer. By looking now, in a low-pressure situation, you're in a good position to put in some time to pick a lawyer or law firm you're comfortable with, and to see how they handle you.

Just get your ducks in a row beforehand. Adding a five-minute question to a half-hour consultation is going to be a lot cheaper both in time and money than having to schedule a second consultation.

Later,
scott


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