Small business owners, whether incorporated or not, have a number of retirement plan options available. If you are considering starting a retirement plan, you should first learn about the kinds of plans available to you. In this article, we’ll discuss two popular retirement plans used by small businesses and the benefits of each.

One of the most popular is the SEP or Simplified Employee Pension. You can contribute 25% of your compensation up to $45,000 for yourself. Of course, you must make a similar contribution for any employees you have. In other words: if you make a 25% contribution for yourself, you must make a 25% contribution for your employee(s) based on their salaries. The benefits:

You can still set up, make a contribution and get a tax deduction for 2007 as long as it’s done by your tax filing deadline. SEP plans have the least paperwork and reporting requirements of any plan, making it easy to set up and administer. You decide whether to make a contribution year-to-year giving you some flexibility in an economic slowdown.

Another popular plan – especially if you have employees – is the SIMPLE IRA or Savings Incentive Match Plan for Employees. The benefits:

A SIMPLE plans allows for payroll deductions by employees – $10,500 in 2007 with a catch-up provision for those over age 50. Employee contributions are matched, usually dollar for dollar of the first 3%. In other words…you are only providing a contribution for those who choose to participate. No annual filing requirements and most of the paperwork is handled by the bank or financial institution making the investments for you and your employee(s).

For more detailed information on retirement plans, including rules for setting them up, the IRS offers a free CD-ROM called “Individual Retirement Arrangement Resource Guide for Small Business Owners and Individuals”. You can order a copy at www.irs.gov/retirement (the fastest way to find it on the website is to type IRA Resource Guide for Small Business Owners in the search box). Also check out IRS Publication 560 – “Retirement Plans for Small Business”.

There are significant tax benefits to any retirement plan. They include the fact that contributions are tax deductible and contributions plus earnings grow without taxation until they are withdrawn. Of course, there are drawbacks as well. To name just two: plan assets are illiquid and there is a substantial penalty (10% plus tax) for early withdrawal.

In addition to helping your business, yourself and your employees, recent tax law changes have handed out more incentives to establish a retirement plan. They include:

Contribution limits that increase regularly allowing you and employees to set aside every larger amounts for retirement. Catch-up provisions that allow employees age 50 and over (including yourself) to side aside additional contributions. Tax credit for small employers that may enable you to claim a tax credit of 50% of the cost of setting up and administering a SEP or SIMPLE IRA plan. There is a maximum cap of $500 per year for each of the first 3 years of the plan. As exciting as this sounds, it’s very unlikely that you’d ever get to use it since these plans typically don’t involve a fee for set up and administration. Tax credit for certain low and moderate- income participants (including the self-employed). The amount of the credit is based on the contribution made and the credit rate. The maximum contribution eligible for the credit is $2,000. The credit rate can be as low as 10% or as high as 50% depending on adjusted gross income. Talk with your tax advisor for more information.
Take Away Wisdom

As a small business owner, there are lots of really good reasons to have a retirement plan. The type of plan you choose is based on your business and personal situation. You may want to talk with your tax advisor or give me a call and we can flesh-out which plan is appropriate for you. However, if you are looking for a tax deduction for 2007

As a small business owner, there are lots of really good reasons to have a retirement plan. The type of plan you choose is based on your business and personal situation. You may want to talk with your tax advisor or give me a call and we can flesh-out which plan is appropriate for you. However, if you are looking for a tax deduction for 2007 – your only option may be a SEP Plan.

Planning a fun and memorable retirement party can seem like a huge chore if you don’t have a game plan for the party already in place. To help get you on your way, we’ve created a basic guideline that is intended to make your job easier and spark your creativity. For organizational purposes, the guideline is broken down into seven major categories:

Venue

Selecting the right venue for a retirement party plays a critical role in determining how much time and effort you will have to put into planning the party. In general, parties held in the workplace demand more planning time and effort because they require you to supply your own food and beverages, decorations, and other party supplies. A restaurant can be an easy venue option for many reasons. To name a few, holding the party at a restaurant minimizes your setup and cleanup times, it eliminates the need for food shopping and preparation, and it reduces the need for party decorations. If holding the party at a restaurant isn’t an option, consider where exactly in your workplace you want to hold the party. The kitchen or break room isn’t always the best option!

Day and Time

Choose a day and time for the party when everyone will be in the office and will not be in a rush to get back to work or their home immediately after. We recommend hosting the party on a Thursday afternoon during work hours (4 to 5 p.m. works well). By holding the party during work hours, you will get a far better turnout.

Theme

Choosing a theme for a retirement party is not essential, but it can add an extra element of fun to the occasion, especially if you are holding the party at your workplace. In choosing a theme, consider where the person might be moving after retiring or if they have a favorite hobby that they will be pursuing in their retirement. For example, if the person is moving to Hawaii, you could throw and island-themed party. If they love to play golf, that could be a theme as well. If the person has a noteworthy trait, you can also make that a theme for the party (i.e. if they always wear blue shirts to work, you could inform the guests to wear blue shirts).

Decorations

Decorations for the party can be simple as long as they are creative. If you choose not to have a theme for the party, you can always hang framed portraits or pictures of the person that is retiring. If the person who is retiring has a good sense of humor, you can doctor the images in Adobe Photoshop to get a rise out of the guests.

Food and Beverage

Serve hors d’oeuvres and drinks to stay within budget and keep the preparations manageable. If you are holding the party in a restaurant, make sure to prearrange which hors d’oeuvres will be served. If the person retiring has a favorite food or beverage, serve it if it fits in with your theme. Be sure to consult your company’s alcohol policy if you plan to serve any alcoholic beverages.

Activities

Party activities should be fun but not overwhelming. Your guests will want to chat and have the opportunity to give their best to the person who is retiring. Slideshows and roasts are two popular retirement party activities. A slide show can either be played in the background during the party, or it can be narrated with a story. A video roast can be another good option. To organize the video roast, send out an email to the person’s friends and colleagues asking them for stories that you can videotape. Employ a funny and well-liked person to serve as the roast master. The roast master can introduce the video with a funny story and also conclude the roast with a few upbeat, witty remarks.

Invitations

Invitations for the party can be done in a number of easy ways: send an email, post flyers in the office, and place formal invitations in work mailboxes. A reminder email is always helpful the morning of the party to ensure maximum attendance.