We are opening a new single member LLC. My husband and I both plan to draw a salary from it. Which is the best retirement plan to establish for the LLC?

We are opening a new single member LLC. My husband and I both plan to draw a salary from it. Which is the best retirement plan to establish for the LLC?
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#1

I hear that a 401k allows the maximum tax shielded contributions. Is that right? What other options exist? pros and cons?


#2

The best plan is a Solo 401(k), provided that you don't have employees.  You can contribute more to the plan than any other retirement plan out there.  Up to $52k.

Craig W. Smalley, E.A., C.E.P.

Admitted to Practice Before the Internal Revenue Service

Certified Estate Planner


#3

You could start a SEP-IRA, a SIMPLE IRA, or a 401k. 

  • If you will have employees, a SIMPLE-IRA is probably best for startups. You will match up to 3% of employee contributions and employees under age 50 can contribute pretax a total of $12,500 (an extra $3,000 for those age 50+).
  • If you have no employees, a SOLO-401k or a SEP IRA will allow you to contribute the most (more than a SIMPLE). In 2015, the maximum is $53k (not $52k). If you want to contribute more than you can into a SIMPLE a SOLO-401k is easier to max out than a SEP IRA.
  • The biggest benefit of a SEP IRA is that you have until 10/15 of the following year to set up and fund a SEP. For example, if you had started your business in 2014 and had enough profits to set up and fund a retirement plan, you would have until 10/15/15 to establish your SEP. You would have had to set up a 401k by the end of the year (12/31/14).
  • If you start with one plan and change your mind, you can switch to a different plan in the following year.

Of course, there are more fine points you would have to consider and you should work with a CPA and/or CFP for specific advice and to get started.

Good luck and I hope this helps!


#4

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