Hello, all.I'm thoroughly confused now. I recently incorporated an S-corporation. I was under the impression that "small businesses"are allowed to have Keogh or money-purchaseplans. But, now that I am reading thedescriptions of each more carefully, I notice that they seem to assume that a small business is one that is either a sole proprietorship or partnership. Doesn'tan S-corp. qualify as a small business?Especially as I am the sole owner/director/employeeof my corporation? If anyone can point me to some authoritativelinks, I'd be really appreciative. The CPAwho's doing my personal taxes seems to thinkS-corps. are not eligible, but he also admitshe knows next to nothing about Medical SavingsAccounts. Another friend has dealt with a CPA who _has_ set up his corporation with amoney purchase plan. So, even the "experts"can't seem to agree about what's correct. Iwill be calling the IRS to get the answer"from the horse's mouth", as it were, but wouldalso like to know if any of you have anyexperience with this particular situation.Thanks,Beonice
Greetings, Beonice, and welcome. You asked:. I recently incorporated an S-corporation. I was under the impression that "small businesses"are allowed to have Keogh or money-purchaseplans. But, now that I am reading thedescriptions of each more carefully, I notice that they seem to assume that a small business is one that is either a sole proprietorship or partnership. Doesn'tan S-corp. qualify as a small business?Especially as I am the sole owner/director/employeeof my corporation? You may set up a SEP, SIMPLE, defined benefit or defined contribution (401k, money purchase, profit sharing) plan for your corporation if you otherwise meet the criteria for doing so. Many providers among the mutual fund families and brokerages would be most happy to take your money and establish a plan for you. If you're not sure what to use, you might engage the services of a fee-only Certified Financial Planner in your area who specializes in retirement planning for small business owners. There are many who do.Regards..Pixy
I work for an S-Corp (just an employee, not an owner) and we have a Keogh. My boss said he considered a SEP and a SIMPLE but chose a Keogh because it gives him more control over how much money to put in. A 401(k) is also possible but the amount of paperwork makes it impractical.
Depending on what your goals are and how much you earn each year, will help to determine whether a SEP or SIMPLE would be better for you.You can choose any of the retirment plans mentioned previously, but the SEP and SIMPLE are the two easiest to setup and if you use a prototype plan it will not cost you anything to setup.SIMPLE will allow you to put the most in if you make Under $43,333.SEP will allow you to contribute upto 15% of your income upto $30,000 annually. And the total amount contributed is a pension expense (don't pay FICA & FUTA)
Thanks for all the input, folks.I've also talked to someone who specializesin retirement plans, and he concurs: I _can_set up any of these plans. Income-wise, themoney-purchase and profit-sharing make the mostsense, as there I am expecting significantcorporate income this year.I have another question, but will ask it ina separate post. :)Thanks again,Beonice
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