In 2004, almost 1 million new personal businesses were formed, bringing their total to nearly 20 million, representing over 70% of the US' businesses. Although many owners mention entrepreneurship as a way to satisfy their interests and social goals, others cite financial needs. These new, older personal business owners appear to have different savings motives. Their optimal saving options include the following qualified plans: an "individual" traditional 401(k) plan, an "individual" Roth 401(k) plan, a profit-sharing plan (PSP), or a defined benefit plan (DBP); and the following employer-sponsored IRAs: a Simplified Employee Pension or a Savings Incentive Match Plan for Employees. A 401(k) provides the best opportunity to maximize contributions with the least amount of compensation. In a PSP, an employer can ensure that an employee fails the eligibility requirements by limiting employment to less than 1,000 hours. By offering a separate DBP and a separate 401(k) plan, contributions and tax benefits can be enhanced.
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