Biggest mistake I can pinpoint in my 30 years as a small business owner is not setting up a retirement plan earlier and it appears to be quite common among entrepreneurs. Not only will it help to reduce the tax burden but, retirement assets are protected in bankruptcy/lawsuits, depending on the state/plan type.
I started a SEP Ira in 2010....switched over to a Simple IRA in 2011. Simple IRA is a very cost efficient plan and very simple to run as far as paper work/requirements. $12,500/year contribution limit for 2016. Employer contribution requirement is 2-3% match or just a straight 2% non-elective contribution. We match 3% (wish we could match more). I've been considering the Safe Harbor 401K option for next year (no nondiscrimination test for highly compensated employees). But it is more expensive to run/more paper work. If the owner doesn't want to contribute more than $12,500/year, the Simple Ira is a great option. Contributions can be rolled out after 2 years to a traditional IRA or a Roth if he wants to do a backdoor Roth.