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Conversely, employers can contribute 2% of each eligible employee’s compensation of up to 0,000 in 2018. Set up a SEP IRA: A simplified employee pension (SEP) is another type of individual retirement account (IRA) to which small business owners and their employees can contribute.In 2018, it lets employees make pretax contributions of up to 25% of income or ,000, whichever is less.To prepare to sell your small business one day, it needs to be able to operate without you.
Owners of the business are also considered employees and can make employee contributions to their own accounts.
IRAs and Solo 401(k)s: If you’re in a competitive field and want to attract the best talent, you might need to offer a retirement plan, such as the two described above.
A business owner taking the Cal Savers route basically has to sign up for the program, give employees the chance to join or opt-out, and make sure their contributions go to their IRA “via simple payroll deduction,” according to the Cal Savers website.
“The program is required to have minimal administrative requirements for employers and state law protects employers from any liability or fiduciary responsibilities,” the California Employment Development Department’s website states.
You definitely want to avoid a distress sale: One problem you’ll encounter if you wait until the last minute to exit your business is that your impending retirement will create the impression of a distress sale among potential buyers and you won’t be able to sell your company at a premium.
More than a third of small business owners surveyed in 2014 said they didn’t want to retire, a quarter said they don’t plan to retire, more than a third said they plan to divide their retirement time between work and leisure, and more than half said they would find it hard to completely retire.
Market conditions will affect your ability to sell your business.
You might want to build flexibility into your retirement plan so you can sell your stake during a strong market or work longer if a recession hits.
Establish a SIMPLE IRA: The savings incentive match plan for employees, or SIMPLE IRA, is one retirement plan available to small businesses.
In 2018, employees can defer up to ,500 of their salary, pretax, and those who are 50 or older can defer up to ,500 by taking advantage of a ,000 catch-up contribution.