Profit Sharing

Profit sharing is a plan that allows employees a share in the profits of the company. Based on the company's earnings, as well as the terms of the plan as implemented by the company, an employee can receive a percentage of profits. This is a great way to allow employees a sense of community and ownership in a company, and can promote good morale and pride in their work. Each company can custom-create a profit sharing plan to suit their needs and should consult their attorney, CPA in the development of the plan.

The benefits of profit sharing for employers and employees are listed below:

  • Employees are able to contribute a portion of their wages to their retirement plan without paying taxes on the income.
  • Employers' contribution to the plan is tax deductible.
  • The period of time to become vested helps to retain staff as they don't want to lose the employer contribution.
  • Employees feel like part of the company's success, thus boosting morale.
  • Employees have common goals to reach and they gain recognition for their efforts when the disbursement is made.
  • Employee investment earnings can grow tax deferred until withdrawn.
  • Loan and hardship withdrawals are allowed. If an employee has a medical emergency or other financial hardships, they can access the money.

Patrick Financial Group, L.L.C., with the help of your attorney, CPA and human resources director, can be an integral partner in making an informed decision about the creation and implementation of a successful profit sharing plan.

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