By: Kathryn Swanson, Financial Advisor
A variety of questions arise regarding financial planning for small business owners. Small business owners typically start their company based on their areas of expertise and quickly find themselves bogged down with figuring out finances, HR responsibilities, accounting, and other headaches that take time away from their skills and business purpose. Instead of questioning if you are doing the right thing, find peace of mind through educating yourself and getting a professional opinion. As an independent, locally owned business in Sioux Falls, we have both expert advice and practical solutions. If you own a small business and are tired of the guesswork and research involved in figuring out financial solutions, read on!
RETIREMENT PLANS Retirement plans are a main concern for small business owners across many industry sectors. There are a variety of account types that can work for you depending on your business’s setup. A SEP IRA or Simplified Employee Pension Individual Retirement Account allows for a higher contribution limit than a traditional IRA. SEPs allow personal contributions and an employer contribution. While SEPs work well to allow a high-income owner to defer large amounts, these accounts require contributions on behalf of all 28 n EMPIRE
employees, making them an unpopular solution as a company increases its employees. SIMPLE IRAs or a Savings Incentive Match Plan for Employees are, as the name suggests, a simpler solution to employee retirement savings as compared to a 401(k). Simple IRAs provide a way for both the employer and employees to contribute funds toward a tax-deferred retirement account. Unlike a 401(k), where employers can match a discretionary percentage, a Simple IRA match is defaulted to 3%. Simple IRAs typically cost less to administer than a 401(k) and have less plan testing and reporting. l 401(k)s are a good solution for those looking to contribute more funds towards retirement, as they allow higher contribution limits compared to a SIMPLE IRA. These plans are costly to administer, but for larger companies, the flexibility of these plans may be worth the increased cost.