Author Topic: Profit sharing/tax shelter finances for a start up company  (Read 3825 times)

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2178
  • Age: 29
Profit sharing/tax shelter finances for a start up company
« on: July 12, 2016, 11:42:25 AM »
Hi folks,

I'm in need of some advice. I joined a start up about a month ago and am planning on staying long term. The company was founded in 2013 and has grown substantially over the years. Is there a tax advantaged account we could get set up to begin saving for retirement?

I know this is a broad question but I can provide some more details if needed. Thanks!
« Last Edit: December 14, 2016, 08:18:03 AM by Cwadda »

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2178
  • Age: 29
Re: Profit sharing/tax shelter finances for a start up company
« Reply #1 on: July 14, 2016, 09:32:54 AM »
Bump !

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 7263
  • Age: 39
  • Location: Seattle, WA
    • My blog
Re: Profit sharing/tax shelter finances for a start up company
« Reply #2 on: July 14, 2016, 12:20:14 PM »
Do you not have a 401(k)?

Axecleaver

  • Magnum Stache
  • ******
  • Posts: 4155
  • Location: Columbia, SC
Re: Profit sharing/tax shelter finances for a start up company
« Reply #3 on: July 14, 2016, 01:33:48 PM »
Are you asking whether the company can establish a plan for its employees, or are you asking what your personal options are in the absence of your company establishing a plan? I set up a 401k for my business, it was not very difficult or expensive. There are some first-year costs associated with plan setup, and some recurring costs for managing the plan. I paid about $1000 for plan setup, $525 a quarter, plus each employee pays $4/month.

I chose a provider who charged a flat rate plus a small fee per employee, rather than a provider who charged higher fees through higher fund expenses. Vanguard offers plans too, but they make more sense once you get over 10-15 employees, and their setup fees were higher ($3500, IIRC).

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2178
  • Age: 29
Re: Profit sharing/tax shelter finances for a start up company
« Reply #4 on: July 14, 2016, 02:14:20 PM »
Do you not have a 401(k)?
No, I do not.

Quote
Are you asking whether the company can establish a plan for its employees, or are you asking what your personal options are in the absence of your company establishing a plan? I set up a 401k for my business, it was not very difficult or expensive. There are some first-year costs associated with plan setup, and some recurring costs for managing the plan. I paid about $1000 for plan setup, $525 a quarter, plus each employee pays $4/month.

I chose a provider who charged a flat rate plus a small fee per employee, rather than a provider who charged higher fees through higher fund expenses. Vanguard offers plans too, but they make more sense once you get over 10-15 employees, and their setup fees were higher ($3500, IIRC).
Yes, I'm asking whether the company can establish a plan for its employees. Thanks for the info, so a 401(k) would be the way to go?
« Last Edit: July 14, 2016, 02:16:50 PM by Cwadda »

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 7263
  • Age: 39
  • Location: Seattle, WA
    • My blog
Re: Profit sharing/tax shelter finances for a start up company
« Reply #5 on: July 14, 2016, 02:51:56 PM »
Yeah, a 401(k) is probably the place to start.

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2178
  • Age: 29
Re: Profit sharing/tax shelter finances for a start up company
« Reply #6 on: July 14, 2016, 02:55:44 PM »
Yeah, a 401(k) is probably the place to start.
Thanks! Any companies to recommend starting one? Ones preferably low fees and starting costs.

letired

  • Pencil Stache
  • ****
  • Posts: 824
  • Location: Texas
    • Needs More Glitter
Re: Profit sharing/tax shelter finances for a start up company
« Reply #7 on: July 14, 2016, 03:20:59 PM »
I worked for a startup that offered SIMPLE IRA's, but they have a much lower allowed contribution threshold, which was frustrating. They are supposed to be more simple to set up though.

Axecleaver

  • Magnum Stache
  • ******
  • Posts: 4155
  • Location: Columbia, SC
Re: Profit sharing/tax shelter finances for a start up company
« Reply #8 on: July 15, 2016, 09:13:34 AM »
Yes, do a safe harbor 401k. Here's the vendor analysis I did when I set mine up in February. I went with myubiquity. They recently went through a major site overhaul which was a total disaster, we couldn't get basic problems solved for weeks. We're only just now coming out of that. Anyway, I'm still there, but I can't recommend them anymore. I would probably go with Employee Fiduciary if I had it to do over again.

Basis points is the extra margin they add to whatever fund they offer - so for example, SurePayroll adds 75 basis points to VTSMX (0.16%) would make it cost your folks 0.91%.

Vendor   Setup   Monthly   per emp   Annual   Year 1   Basis Points
ADP   1500   308   4   3888   5388   0
Surepayroll   1000   87.5   0   1050   2050   75
Vanguard   1000   0   only ppl with balance   3475   4475   0
Ubiquity   595   175   4   2292   2887   5.5
Employee Fiduciary   500         1500   2000   8
« Last Edit: July 15, 2016, 09:15:19 AM by Axecleaver »

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2178
  • Age: 29
Re: Profit sharing/tax shelter finances for a start up company
« Reply #9 on: July 16, 2016, 06:28:58 AM »
Yes, do a safe harbor 401k. Here's the vendor analysis I did when I set mine up in February. I went with myubiquity. They recently went through a major site overhaul which was a total disaster, we couldn't get basic problems solved for weeks. We're only just now coming out of that. Anyway, I'm still there, but I can't recommend them anymore. I would probably go with Employee Fiduciary if I had it to do over again.

Basis points is the extra margin they add to whatever fund they offer - so for example, SurePayroll adds 75 basis points to VTSMX (0.16%) would make it cost your folks 0.91%.

Vendor   Setup   Monthly   per emp   Annual   Year 1   Basis Points
ADP   1500   308   4   3888   5388   0
Surepayroll   1000   87.5   0   1050   2050   75
Vanguard   1000   0   only ppl with balance   3475   4475   0
Ubiquity   595   175   4   2292   2887   5.5
Employee Fiduciary   500         1500   2000   8

Sweet, thanks for taking the time to put out all that info. I just have one question: is the annual section per employee or for the entire company yearly?

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2178
  • Age: 29
Re: Profit sharing/tax shelter finances for a start up company
« Reply #10 on: July 16, 2016, 07:31:40 AM »
Would it be more beneficial to set up a Simple IRA as it is just my boss and me? The contribution limits are lower but the costs and fees might also be lower as well.

COlady

  • Bristles
  • ***
  • Posts: 382
Re: Profit sharing/tax shelter finances for a start up company
« Reply #11 on: July 16, 2016, 09:41:58 PM »
What type of entity is the company? C-Corp, S-Corp, partnership?

Axecleaver

  • Magnum Stache
  • ******
  • Posts: 4155
  • Location: Columbia, SC
Re: Profit sharing/tax shelter finances for a start up company
« Reply #12 on: July 17, 2016, 08:57:12 AM »
"Annual" was an attempt to compare apples to apples, it's basically the monthly fee times 12, plus employee fees. I made this table for my own situation, with 4 employees (including myself). So probably would have been clearer to leave that column out :/ Sorry!