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[Jim Allman <jim AT ibang.com>]

On Mar 3, 2005, at 3:22 PM, Diana Duncan wrote:
> I think you are limited to a SIMPLE IRA or some other type of IRA.  
> Which is not really a limitation.

Actually, there is now a "sole-prop 401(k)" that can be used within an 
S-corp, LLC, or (not surprisingly) sole-prop business. It allows for 
higher contributions (more tax-deferred retirement savings) than a 
SIMPLE or SEP-IRA, because you can also add the salary deferral (max = 
$14,000 for this year) in addition to profit-sharing like a SEP.

It's called a sole-prop 401(k), among other names, because due to its 
generous contribution limits, this plan is typically adopted by a 
business whose sole employees are the owner and perhaps a spouse.

The contribution limits vary somewhat based on the type of entity (a 
corporation allows a bit more than sole prop), but are quite high in 
any case. It's also very flexible from year-to-year.

The main issue is the cost to set this up. Many providers will want a 
lot of cash to administer this kind of plan, but some will do it for 
little or no money. Mine's through TD Waterhouse, and it hasn't cost me 
a dime; they just want my business as an investor. In return for their 
minimal participation, I'm responsible for an annual summary report to 
the IRS, but this is pretty straightforward and hasn't even been 
required yet (haven't reached the required minimum balance in the 
plan).

These plans are a fairly recent development, and many people (including 
CPAs) are still getting up to speed. But there's good info on the web 
(google "solo 401k" for a start) and it's certainly worth the effort.

Hope this helps!

  =jimA=

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Jim Allman
Interrobang Digital Media
http://www.ibang.com/
(919) 649-5760