Retirement Plans

April 13, 2006

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When comparing the limited liability company (LLC) and the corporation and their unique tax implications, at one time perhaps the biggest tax advantage enjoyed by the corporation was the ability to establish retirement plans.

During this period in the law, businesses treated as sole proprietorships or partnerships for tax purposes (such as LLCs) could not establish tax-qualified retirement plans.

Back then, many tax advisors recommended establishing a corporation to take advantage of this one important tax planning opportunity.

However, the law was changed many years ago to allow self-employed individuals--and thus, owners of LLCs--to establish retirement plans (so-called Keogh or SEP plans) with essentially the same tax deductibility benefits as those enjoyed by corporations (see our discussion of retirement plans and protecting their assets).