Internetworkers: http://www.ibiblio.org/internetworkers/

["Colleen McCarthy" <cmccarthy1 AT nc.rr.com>]

Thanks very much!  Colleen


Colleen McCarthy, BSMT, BSEE, MBA, PMP
(h) 460-0641


-----Original Message-----
From: internetworkers-bounces AT lists.ibiblio.org
[mailto:internetworkers-bounces AT lists.ibiblio.org]On Behalf Of Jim
Allman
Sent: Thursday, March 03, 2005 4:17 PM
To: Internetworkers: http://www.ibiblio.org/internetworkers/
Cc: Colleen McCarthy
Subject: Re: [internetworkers] 401(k) for Sole Proprietor


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=

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

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