Chart Your Course: SEP, Profit Sharing & Advanced Retirement Plans for Business Owners
At Unifirst Financial & Tax Consultants, we help business owners implement tax-efficient retirement plans that reduce taxable income, build long-term wealth, and reward employees. Our most effective strategies include the SEP IRA, Profit Sharing Plan, and advanced options such as Defined Benefit Plans, Cash Balance Plans, and Fully Insured Retirement Plans. Whether you're a solo entrepreneur or managing a growing team, we tailor the right strategy to meet your needs.
Choose the Right Plan for Your Business
Explore two of the most practical and flexible retirement strategies for small business owners. Click below to learn which one fits your goals best.
Explore SEP IRA Benefits
✔ Contribute up to 25% of income (max $69,000)
✔ Ideal for owner-only or small teams
✔ Lower administrative cost, high flexibility
Plan Design: Every plan begins with strategy. We assess your business goals, tax position, employee structure, and industry needs to tailor a retirement solution that fits.
Plan Implementation: From plan documentation to onboarding employees, we ensure a seamless and compliant setup, while you stay focused on running your business.
Ongoing Administration: We manage filings, compliance checks, contribution tracking, and updates so your plan evolves with your business — year after year.
✔ Reduce Taxable Income: Employer contributions are tax-deductible, lowering your business tax liability.
✔ Boost Employee Morale: Show your employees you care about their future.
✔ Build Long-Term Wealth: Empower your team to retire confidently while securing your own future.
Simplified Employee Pension (SEP)
SEP IRA
Smart, powerful, and built for simplicity. The SEP IRA (Simplified Employee Pension) is one of the easiest retirement plans to establish and maintain. Ideal for self-employed professionals, sole proprietors, freelancers, and small business owners with no or few employees, it offers high contribution limits without the complexity of 401(k)s.
✔ Contribute up to 25% of income (max $69,000 in 2024)
✔ Tax-deductible employer contributions—no payroll taxes required
✔ 100% immediate employee vesting with low administrative burden
✔ Flexible contributions: increase in good years, pause in lean ones
Why it works: A SEP IRA is the perfect blend of tax savings and simplicity, with no annual filing requirements for the employer and complete control over when and how much to contribute.
Example Scenario: Jessica, a freelance graphic designer in New York, earns $120,000 annually. By contributing 25% of her income to a SEP IRA, she deposits $30,000 into her retirement and reduces her taxable income to $90,000. She avoids self-employment tax on the contribution and secures long-term retirement growth, all while skipping the administrative burden of a 401(k). A SEP IRA is the perfect blend of tax savings and simplicity, with no annual filing requirements for the employer and complete control over when and how much to contribute.
Later, Jessica brought her spouse and college-age son onto payroll to help with bookkeeping and client service. She contributed $30,000 to her own SEP IRA, $15,000 to her spouse’s, and $5,000 to her son’s account. That’s a total of $50,000 in deductible contributions — keeping money in the family, reducing taxable income, and building wealth across generations. A SEP IRA is the perfect blend of tax savings and simplicity, with no annual filing requirements for the employer and complete control over when and how much to contribute.
Control how you reward yourself—and your team. A Profit Sharing Plan lets employers decide how much to contribute each year and how to allocate those contributions. It’s a powerful tool for businesses with employees and offers incredible flexibility in funding retirement—especially for owners looking to maximize their own benefits.
✔ Discretionary contributions based on company profitability
✔ Up to 25% of total payroll may be tax-deductible
✔ Advanced formulas (e.g., age-weighted or new comparability) allow more funds to go to owners or key staff
✔ Can be layered with 401(k) or Defined Benefit Plans for larger contributions
Why it works: Profit Sharing Plans can be custom-engineered to reward loyalty, retain top talent, and supercharge your personal retirement account with tax-deductible dollars.
Example Scenario: Daniel owns a small marketing agency with five employees and a total annual payroll of $300,000. In a profitable year, he contributes $75,000 to a Profit Sharing Plan — 25% of payroll — and allocates $40,000 of that directly to himself using an age-weighted formula. He deducts the entire contribution from his business income, reducing his tax bill by nearly $20,000 while rewarding his team and building his own retirement.
As Daniel's wife takes on a formal role managing operations, and their college-aged daughter helps with content creation, he adds them to payroll. Now, instead of only benefiting himself, Daniel is able to contribute to their Profit Sharing allocations as well. This allows him to shift more of the company’s profits into retirement savings across the family while keeping the funds deductible — creating a long-term, tax-smart wealth strategy.
Personal wealth building — You can reward yourself as the owner while staying compliant and strategic
Future planning — These plans serve as a long-term exit strategy or succession tool
Unifirst Financial & Tax Consultants work with numerous providers that will provide everything needed to establish your retirement plan. The basic requirements to set up a tax-qualified retirement plan are:
Eligibility: You must be an eligible employer.
Documentation: The plan must be in writing.
Communication: The existence of the plan and its rules must be communicated to your employees.
Exclusive Benefit: The plan must be established and maintained for the exclusive benefit of your employees and their beneficiaries (owners are considered employees).
Permanence: You must intend the plan to be permanent. Although the plan can be terminated if necessary, it cannot be established solely for short-term tax savings.
Once your plan is established, there are annual administrative tasks that must be performed, including non-discrimination testing, employee account determinations, and annual reporting of the plan's qualified status to the government. We assist with all these ongoing administrative requirements.
A SEP IRA (Simplified Employee Pension) allows employers to make contributions to traditional IRAs for employees (and themselves). It's popular among self-employed individuals and small businesses because of its high contribution limits and simple administration.
You can contribute up to 25% of your net compensation, up to a maximum of $69,000 in 2024. For self-employed individuals, the effective contribution is closer to 20% after IRS adjustments.
As a business owner, your maximum contribution to a profit-sharing plan in 2024 is the lesser of:
100% of your compensation, or
$69,000
If you're self-employed, calculating your contribution involves a few additional steps:
Determine Net Earnings: Start with your net profit from self-employment.
Adjust for Self-Employment Tax: Subtract half of your self-employment tax from your net profit.
Calculate Contribution: Apply a reduced contribution rate (typically around 20%) to the adjusted net earnings to find your maximum allowable contribution.
It's important to note that for self-employed individuals, the contribution rate is effectively reduced due to the way net earnings are calculated. This ensures that contributions don't exceed the legal limits.
For detailed calculations and worksheets, refer to IRS Publication 560, which provides comprehensive guidance on retirement plans for small businesses.
Here is a simplified breakdown.
2025 Profit-Sharing Plan Contribution Limits
Maximum Contribution: The lesser of 100% of your compensation or $70,000.
Catch-Up Contributions:
If you're age 50 or older, you can contribute an additional $7,500, bringing the total to $77,500.
Starting in 2025, individuals aged 60 to 63 can make a higher catch-up contribution of $11,250, increasing the total to $81,250.
For Self-Employed Individuals
If you're self-employed (e.g., sole proprietor or single-member LLC), calculating your contribution involves:
Determine Net Earnings: Start with your net profit from self-employment.
Adjust for Self-Employment Tax: Subtract half of your self-employment tax.
Calculate Contribution: Apply a reduced rate (approximately 20%) to the adjusted net earnings to determine your maximum contribution.
These limits are adjusted annually, so it's essential to stay informed about the current year's limits to maximize your retirement contributions effectively.
If you'd like assistance calculating your specific contribution limit based on your income, feel free to provide your net earnings, and I can help walk you through the process.
Unlike SEP IRAs, Profit Sharing Plans let you choose how much to contribute each year, and you can use allocation formulas (such as age-weighted or new comparability) to legally direct more to owners or key employees.
Contributions are fully deductible from your business income. They also aren't subject to FICA or Medicare taxes. This allows you to lower your tax liability while building retirement savings.
You can make retirement contributions for family members just like any other employee — as long as they’re legitimately on payroll. This allows you to shift profits into family-held retirement accounts while gaining deductions.
Why this matters: This strategy not only lowers your business tax liability — it turns your household payroll into a multi-generational wealth-building machine. Instead of sending that money to the IRS, you're using it to create retirement assets for your family while keeping more capital working for your legacy. Over time, this compounds into a powerful advantage that most business owners overlook. — as long as they’re legitimately on payroll. This allows you to shift profits into family-held retirement accounts while gaining deductions.
No. Both SEP IRAs and Profit Sharing Plans allow for discretionary contributions. You can pause in lean years or ramp up when cash flow is strong.
Yes. Both plans work extremely well for solopreneurs. If you’re the only employee, you have full control and all the benefits of the plan.
SEP IRA: Can be opened and funded by your business tax filing deadline (plus extensions).
Profit Sharing Plan: Must be established by December 31 but can be funded by your tax deadline.
Book a call with us. We’ll walk you through the options, run tax projections, and design a plan that aligns with your income, goals, and hiring needs.
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Let’s build a customized retirement strategy that reduces your taxes, strengthens your team, and prepares you for a financially confident exit.
Are you using SEP IRAs and Profit Sharing Plans to their full potential — or missing out on thousands in tax-deferred savings each year?
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