business plan for small business owner

How to Write a Business Plan for a Small Business

Noah Parsons

24 min. read

Updated September 2, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of writing a business plan

If you’re reading this guide, then you already know why you need a business plan . 

You understand that writing a business plan helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your business plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After writing your business plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

When writing a business plan, the produces and services section is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

When writing a business plan, the operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

The last section of your business plan is your financial plan and forecasts. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI to write a business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of writing a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Writing a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of writing a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan

Related Articles

7 Min. Read

How to Write a Bakery Business Plan + Sample

5 Min. Read

How To Write a Business Plan for a Life Coaching Business + Free Example

3 Min. Read

What to Include in Your Business Plan Appendix

1 Min. Read

How to Calculate Return on Investment (ROI)

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

We use essential cookies to make Venngage work. By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.

Manage Cookies

Cookies and similar technologies collect certain information about how you’re using our website. Some of them are essential, and without them you wouldn’t be able to use Venngage. But others are optional, and you get to choose whether we use them or not.

Strictly Necessary Cookies

These cookies are always on, as they’re essential for making Venngage work, and making it safe. Without these cookies, services you’ve asked for can’t be provided.

Show cookie providers

• Google Login

Functionality Cookies

These cookies help us provide enhanced functionality and personalisation, and remember your settings. They may be set by us or by third party providers.

Performance Cookies

These cookies help us analyze how many people are using Venngage, where they come from and how they're using it. If you opt out of these cookies, we can’t get feedback to make Venngage better for you and all our users.

• Google Analytics

Targeting Cookies

These cookies are set by our advertising partners to track your activity and show you relevant Venngage ads on other sites as you browse the internet.

• Google Tag Manager
• Infographics
• Daily Infographics
• Popular Templates
• Accessibility
• Graphic Design
• Graphs and Charts
• Data Visualization
• Human Resources
• Beginner Guides

Blog Business Small Business Owners: How to Write Your Business Plan [+ Editable Templates]

Small Business Owners: How to Write Your Business Plan [+ Editable Templates]

Written by: Krystle Wong Apr 03, 2023

As a small business owner, it can be tempting to jump right into launching your business and skip the step of creating a business plan. However, having a well-written business plan is essential to the success and growth of your business. 

A business plan serves as a roadmap for your business, outlining your goals, strategies, and action plans. It helps you stay on track and focused, ensuring that every decision you make is aligned with your overall business objectives.

While creating a business plan may seem daunting, it’s worth the time and effort to ensure the long-term success of your business. In this article, I’ll dive into the insights on how a business plan can help your small business thrive and how to create one that stands out. 

Ready to get started with creating a business plan to win over your investors? Pick from Venngage’s 10,000+ professional  templates  to customize your own for free!

Click to jump ahead:, why is having a business plan important for small businesses, what are the 3cs for writing a successful small business plan, what are the 7 steps of creating a winning business plan, how to make my small business plan stand out.

Nevertheless, you may be wondering – is it really necessary to go the extra mile and build a business plan even as a small business? 

For many business owners, it’s easy to get caught up in the day-to-day operations of running your business. However, it’s essential to take a step back and create a solid business plan – especially if you’re looking to:

1. Clarify your vision and goals

Whether you’re trying to start a new business or expand your existing business, it’s important to know what your goals are. The plan will serve as a blueprint for how you plan to grow and sustain your business over time. 

2. Secure Funding

Another reason for writing a business plan is to seek out investors for your business. A compelling business plan demonstrates the potential for growth and profitability of your business and increases your chances of securing funding. Partnering with a reliable invoice finance provider can offer a flexible solution to manage cash flow and support growth, especially when navigating the financial complexities of expanding a small business.

3. Identify potential challenges

From financial obstacles to operational and staffing challenges, having a business plan forces you to think critically about your business. From there, you can develop strategies to address these challenges more effectively.

4. Attract and retain customers

Having an exciting product or service is simply not enough. You need to think about how you can get customers to keep coming back to sustain in the long run. With a business plan, you can develop a strategy that resonates with your customers and stand out from the competition.

5. Measure performance

Your should include your financial projections and key performance indicators to measure your achievements. By regularly reviewing and updating your business plan, you can also ensure that your business is on track to meet its goals.

Ready to put your ideas down on paper? Here are  15+ business plan templates you can use for strategic planning .

As an entrepreneur, you’d know that running a successful business goes beyond just your day-to-day operations. Therefore, having a detailed business plan can help you take a closer look at your business — starting by analyzing your 3Cs. 

By focusing on these three key areas, you can develop a plan that effectively communicates your business concept, identifies your target customer, and positions your business to compete in the market.

The first ‘C’ refers to the concept of your business. Look for gaps in the market you’re in and how your product or service solves a problem for your target market. Focus on what is your competitive advantage and how it sets you apart from your competitors. 

Your business plan should also include information about your company’s history, business structure and mission statement. Having a solid understanding of your business will also come in handy when writing your company description and earn you extra first impression points.

2. Customers

The second ‘C’ is all about understanding your target markets and potential customers. Before you dive deep into your business plan, you should first conduct market research. This would help you identify your ideal customer profile, including their demographics, behaviors and preferences.

Additionally, you should explain how you plan to reach and acquire these customers with a detailed marketing and sales strategy plan. Creating a user persona guide helps you understand your target market and how they use your product or service. Here’s an example that you can use:

Visualize your customers with Venngage’s  User Persona Guide  tool today. It’s free and most importantly — no design experience is required.

3. competitors.

Your final “C” in writing an effective business plan is no other than your competitors. Competitor analysis is critical in positioning your business for success. You should definitely research and evaluate your competitors, analyzing their strengths and weaknesses, market position, and pricing strategy.

At the same time, you should also outline your strengths and weaknesses and explain how you plan to overcome them. You can always conduct a SWOT analysis on both your and your competitors’ business. This SWOT competitor analysis template is a good example of how it’s done: 

Check out this article to learn everything about  utilizing infographics to create an effective business plan . 

If you’ve read this blog on  how to create a business plan , you’d know that a professional plan typically has the following sections: 

• Table of Contents
• Executive summary
• Company description
• Market analysis
• Organization and management
• Service or product line
• Marketing and sales
• Funding request
• Financial projections
• An appendix

This may seem overwhelming for many small business owners and you’re probably thinking of backing out at this point. Therefore, creating your  bus i ness plan outline  before you go into the details can ensure that you don’t leave any essential information out of your plan. 

But let me assure you that you’ll be well on your way to creating a successful business plan that can help you achieve your goals by following these steps:

Step 1: Define your business idea

Every business idea should be born out of a problem that needs solving. To find a good business idea , start by identifying a problem or a need in the market that is not adequately addressed. For example, if you notice members in your community Facebook group are often looking for cleaners in the area with little success, that’s a market you can tap into by starting a cleaning business .

You also should clearly define your business idea and what you plan to offer. Don’t forget to also consider your business’s cost, feasibility, scalability, and profitability.

For example, this candle business highlights that handmade candles are made from 100% beeswax to ensure product safety and quality: 

Once you have that figured out, it’ll be easy as pie for you to come up with your company description. Your company description should include details such as your business location, business resources, management team and more. 

Step 2: Conduct your market research

Conducting thorough market research builds a strong foundation for your market analysis. What’s more, it provides insights into the viability of your business idea and helps you develop a winning strategy.

You can conduct primary market research with:

• Customer interviews
• Online surveys or questionnaires
• In-person focus groups
• Purchasing a competitor product to study packaging and delivery experience

Or secondary market research by:

• Reading company records
• Examining the current economic conditions
• Researching relevant technological developments

This market overview template will help you look into industry trends and your target audience and collect vital data for your marketing strategy:

Step 3: Analyze your competitors

A  competitive analysis  report outlines the strengths and weaknesses of your competitors compared to those of your own business. 

Start by creating a competitor profile for each of your competitors which typically includes:

• The company’s revenue and market share
• The company’s size and management team
• A SWOT analysis 
• An overview of how the brand is perceived by customers

In addition to specific product features, here are some attributes that you might want to look into:

• Product quality
• Number of features
• Ease of use
• Customer support
• Brand/style/image

Use this competitor analysis report template to dive deeper into your competitor data and inform your marketing and business strategies: 

Step 4: Develop a marketing strategy

Your marketing strategy can be brief, covering a single campaign, or it can be long-term, detailing your marketing plans for an entire year. 

An effective marketing plan revolves around your target market and finding ways to reach them effectively. This may include branding, advertising, and social media .

While different marketing tactics are used to achieve different goals, they should always be in sync with the overall goals of your business. 

Use a mindmap to organize your marketing goals and strategies to make sure that they are in line with your business goals. 

If you’re running a small business, you may have limited funds to allocate toward marketing efforts. Some commonly used marketing strategies for small businesses include:

• Social media marketing
• Content marketing
• Work with local influencers
• Word-of-mouth
• Customer referral programs
• Customer loyalty plans

This Japanese restaurant business plan details both their online and offline marketing strategies. They’re also keen to capitalize on the steady stream of tourists coming into the city by catering to groups with large orders.

You can also use a timeline infographic like this one here to keep you on track with your marketing goals:

Don’t know where to start? This article will give you a crash course on  how to make your marketing plan . 

Step 5: identify your key performance indicators (kpi).

With all those marketing strategies in line, the next step is to identify the key metrics you’ll use to measure your business’s success. So, what is your KPI going to be? Is it revenue, profit margin, customer acquisition cost or customer retention rate?

KPIs give you a clear understanding of how well your business is doing and provide valuable insights that help make informed decisions. Without identifying KPIs, it can be difficult to gauge the effectiveness of your efforts. 

Step 6: Develop a Financial Plan

We’ve finally reached the core of your business strategy, which is the section that your potential investors are most interested in – your financial plan.

Having your business plan lined out can help you understand the financial viability of your business and prepare for potential challenges. It can also persuade investors and get the funding you need.

Some of the important details that you’d want to include in your financial plan are your:

• Income statement
• Cash flow statement
• Balance sheet 
• Sales forecast
• Break-even analysis
• Financial health 
• Financial forecasts

Planning to start your own gym ? Use this template to project your revenues and expenses: 

Step 7: Determine your funding needs

Now that you have your financial plans worked out, you’ll have a clearer picture of how much funding you’ll need to start and grow your business . 

There are several types of funding options available for small businesses seeking financing, including:

• Self-funding or bootstrapping
• Family and friend loans
• Crowdfunding
• Angel investors
• Venture capital
• Business loans

For example, this non-profit business plan template details the fundraising activities they have to generate operational funds.

Start customizing your business plan with these  15+ templates that would help you win over your investors, lenders, or partners . 

As new business owners, having a strong business plan is essential for securing funding and laying the foundation for your company’s success. However, with so many business plans vying for investors’ attention, it can be challenging to make yours stand out. 

In summary, the following tips can help you write a business plan that captures the attention of investors:

Focus on your competitive advantages

Furthermore, show customers and investors why they should choose you over others. Highlight what sets your business apart from your competitors and how your product or service can serve as a solution. 

Show a deep understanding of your target market

Visualize your ideal customers and their needs with a user persona and analyze your competitors. This will help you explain how your business can meet those needs better than your competitors. 

Provide a clear and concise executive summary

Start with a short, punchy summary that gives investors or lenders an overview of your business. Your executive summary should also include your plans, its value proposition, and the opportunities it presents to attract funding.

Provide solid financial projections

Investors and lenders want to see that your business has a foreseeable future. Make sure to detail your business financials such as cash flow statement , income statement, break-even analysis and balance sheet.

Be specific about your goals and milestones

Lay out achievable goals and milestones that you aim to reach in the short and long term. This will give investors a clear sense of your vision and your commitment to achieving it.

Show your passion

Finally, don’t be afraid to let your passion for your business shine through. Investors and lenders want to see that you are committed to your business and that you believe in its potential for success.

Elevate your small business with an exceptional business plan that sets you apart from the competition

Having a well-thought-out business plan can really max out your business’s potential and win over your investors. But as an entrepreneur, growing a business requires a lot of time and effort and you might not have the extra time to spend on designing your business plan. 

But don’t you worry – Venngage has got it covered for you. Designing a business plan requires little to no effort with Venngage’s customizable professional templates. Most importantly, no design experience is required. 

Pick from one of the templates above or browse for more  Business Plan Templates  and start customizing your own today! 

Discover popular designs

Infographic maker

Brochure maker

White paper online

Newsletter creator

Flyer maker

Timeline maker

Letterhead maker

Mind map maker

Ebook maker

Financial Planning for Small Business Owners

Learn the basics of creating a financial plan for small business owners.

• Newsletter sign up Newsletter

There are many different kinds of small business owners in all stages of their business. Some have just started putting their ideas into action in a startup, while others are in the growth stage or even planning an exit strategy.

No matter which stage your business is in and whether you're a dreamer or more of a pragmatist, there is one thing you can't afford not to do. You need a holistic financial plan that takes into account where your business is now and what the plan is for the future.

For small business owners, establishing a financial plan comes with an added complexity, which is the business. In some ways, the business and personal sides of your financial plan will be mutually exclusive.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Separate your personal financial goals from your business goals 

Before making any plans, it's critical to understand that you are not your business. Most small business owners have goals for their business, but it's important to also make financial goals for yourself and to keep them separate.

It can be tempting to combine the two, especially for sole proprietors or single-member LLC owners whose business is included on their individual income tax return. However, by not separating your business from your personal financial goals, you could be missing out on some amazing personal achievements.

For example, some personal financial goals might include setting up and contributing to an education fund for your child, boosting your retirement savings, funding and going on a vacation, and buying your first home or downsizing when your children move out of the house.

On the other hand, some financial goals for your business might include increasing sales to a particular amount, finding more customers, or establishing a certain percentage of growth rate.

Consider alternative funding options to diversify your business-related risk 

You may also want to look at other places where you can further separate yourself personally from your business. The easiest place to look is at the many available funding options for your business.

Most small business owners invest in their own businesses using their own money and time, which may be appropriate in certain situations. However, just as you would diversify your investment portfolio, so you may also want to diversify your business-related risks.

Using your own capital, or, in a worst-case scenario, your own credit cards, places you at significant personal financial risk if something happens to the business. In some cases, though, it might make sense to cede some of that risk to another party. After all, today's digital world has brought a wider array of potential funding options that range from venture capital and private equity to crowdfunding, business loans, and even more creative options like a small business incubator or accelerator.

The Small Business Administration is also an excellent resource for business owners, not only for information and guidance but also, in some cases, for low-interest business loans.

Remember to plan for retirement

For small business owners, retirement planning actually sits at the crossroads between personal and business financial planning. It can be tempting to just keep pouring your money back into the business, but that can make it difficult, if not impossible, to save for retirement.

Many small business owners don't save for retirement because they believe they'll be able to sell their business and live off the proceeds of the sale in retirement. However, most overestimate what their business might be worth, especially when looking decades into the future.

Simplified Employee Pension ( SEP ) IRAs and individual 401(k)s both enable small business owners to plan ahead for the days when they finally retire.

Diversify everywhere 

Another important thing small business owners should remember when creating their personal financial plans for themselves and their business is diversification. A small business is a piece of a larger investment portfolio, but many business owners don't recognize this.

Being in business represents a significant risk, even if it seems like you're in a safe industry. As a result, it makes sense for small business owners to target low-risk investments for the rest of their investment portfolio.

Prepare your exit strategies 

Finally, small business owners should prepare their exit strategies — for both their personal legacy and their business. From a personal perspective, business owners can't afford not to have a will and estate plan to ensure the business doesn't fold upon their death. Many also want to leave their business to the next generation, but without a will, ownership succession becomes hazy.

In terms of the business, you should also create a succession plan designating who will take over when you retire or pass. The financial reasons for creating a succession plan are similar to those for creating a will and estate plan, although these plans differ from a practical standpoint. In terms of your personal financial plan, you're designating heirs, while for your business financial plan, you're designating the next CEO or manager. They could be the same person or different people, depending on your situation.

Don't be too busy to plan

These guidelines are only the very basics of what a small business owner needs to consider when creating a financial plan. Some other factors that may play a role in your personal and business financial plans include insurance (property, professional, and otherwise), preparations for growth, planning for disability, and more. No two financial plans are the same, and these other factors may fall under some of the earlier headings.

Unfortunately, many small business owners find themselves tapped out when it comes to financial planning. It takes so much energy and enthusiasm to keep the business going that they sacrifice their personal financial wellbeing. However, your busiest times will be when you need these financial plans the most, and having separate personal and business financial plans will make everything much easier.

Related articles

• Financial Health Checklist for Small Business Owners
• Start an Online Business on the Cheap
• For Business Owners, Estate and Exit Planning Join Forces

Get Kiplinger Today newsletter — free

Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jacob is the founder and CEO of ValueWalk. What started as a hobby 10 years ago turned into a well-known financial media empire focusing in particular on simplifying the opaque world of the hedge fund world. Before doing ValueWalk full time, Jacob worked as an equity analyst specializing in mid and small-cap stocks. Jacob also worked in business development for hedge funds. He lives with his wife and five children in New Jersey. Full Disclosure: Jacob only invests in broad-based ETFs and mutual funds to avoid any conflict of interest.

The race for the White House is heating up and these five stocks are set to benefit if Donald Trump claims victory.

By Will Ashworth Published 7 September 24

These six target-date funds are good set-it-and-forget-it options that are a staple of retirement plans.

By Nellie S. Huang Published 7 September 24

• Contact Future's experts
• Terms and Conditions
• Privacy Policy
• Cookie Policy
• Advertise with us

Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site . © Future US, Inc. Full 7th Floor, 130 West 42nd Street, New York, NY 10036.

Get a retirement plan that’s right for your business

Small-business owners have unique needs when it comes to saving for their retirement and helping their employees. 

Vanguard has transferred existing Individual 401(k), SIMPLE IRA, and SEP-IRA plans with multiple participants to Ascensus. If you're just getting started, those plans can be established directly with Ascensus. Vanguard will continue to offer a one-person SEP-IRA.

Access your existing small-business retirement plan

Consider small-business retirement plans.

VANGUARD SEP-IRA (One person)

The SEP-IRA (Simplified Employee Pension) is the simplest option for small-business owners. Looking to open a SEP-IRA for only one person? We’ve got you covered.

View the Vanguard SEP-IRA

ASCENSUS Individual(k)

An Individual(k)—also known as Individual 401(k)—maximizes retirement savings if you're self-employed or a business owner with no employees other than your spouse. Ascensus also offers a Roth option.

ASCENSUS SIMPLE IRA

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is a great starter plan that encourages employees to contribute to their retirement.

ASCENSUS SEP IRA (Multiple participants)

Ascensus offers a multi-participant SEP IRA that can support a business that employs others and provides access to a diverse lineup of Vanguard mutual funds.

Vanguard is only responsible for content on our own website.

Size up your small-business retirement plan choices

Get to know retirement plans for small businesses. Try our interactive tool to see which plan may be best for you and your business.

An experienced provider to meet your needs

As we focus on areas where we can provide the highest value, we want to be sure your small-business plan thrives. Ascensus was founded more than 40 years ago with a singular purpose—to help people save for what matters. As an industry leader, they provide versatile capabilities, insights, and experience to meet your plan’s needs.

Industry leadership

As a leading provider of tax-advantaged savings and retirement solutions, you’ll benefit from Ascensus’s extensive retirement experience through all stages of your financial journey.

Ascensus’s market insights and educational resources—along with dedicated professionals serving small-business plans—will provide support for your personal and business success.

Delivering streamlined digital experiences with the needs of small businesses in mind, Ascensus's platforms are designed to provide flexibility, scalability, security, and cost-efficiency.

Vanguard funds

You'll have access to a diverse lineup of Vanguard mutual funds within your retirement account at Ascensus.

Ready to get started?

You can open a SEP-IRA at Vanguard if there is only one person. Give us a call so we can help you get started with your plan.

855-490-4668

Other plan types for small business owners can be opened directly through Ascensus. Visit their website to learn more.

All investing is subject to risk, including the possible loss of the money you invest.

Ascensus, LLC provides administrative and recordkeeping services. It is not a broker-dealer or an investment advisor and does not provide tax, legal, or accounting services. Ascensus® and the Ascensus logo are registered trademarks of Ascensus, LLC. Individual(k) is a trademark of Ascensus, LLC. ©2024 Ascensus, LLC. All Rights Reserved.

• compare our planners
• Take the Planner Quiz!

Choosing the Best Business Planner for Owners and Entrepreneurs

Staying organized and on top of tasks is crucial for success in most people's everyday lives. In the scope of the business world, that sentiment might ring even more true. Whether you're a seasoned business owner or a budding entrepreneur, having a reliable business planner can make all the difference in managing your daily activities and achieving your long-term goals.

There are countless options available in the market, and that makes choosing a planner daunting. The key is to find a business planner that aligns with your unique needs and preferences. In this guide, our planning experts will help you explore the key factors to consider when selecting the best business planner and highlight some top choices.

Learn more about how to use a planner for beginners .

How to Choose the Best Business Planner

The first consideration when choosing a business planner is the size that suits your lifestyle and workspace. For both large and small business owners, a planner that is too large may be cumbersome to carry around, while one that is too small might not offer enough space for detailed planning. While you’re looking for the right planner size , explore all of your options, from compact options perfect for on-the-go entrepreneurs to larger formats for those who prefer a more spacious layout.

Compact Portability: On-the-Go Entrepreneurs

For those constantly on the move, a compact-sized planner is a game-changer. Compact planners are designed to slip easily into a bag or briefcase, ensuring you have your planning companion with you wherever business takes you. This size is the best planner choice for entrepreneurs who need quick access to their schedules, to-do lists, and important notes without the burden of carrying a bulky planner.

An A5 planner or PetitePlanner Organization System may be just right for you.

Classic Dimensions: The Balanced Choice

Classic-sized planners strike a perfect choice for work-life balance, offering enough space for detailed planning while remaining portable. This 7x9 size is ideal for individuals who want a comprehensive planner that can accommodate both broad overviews and specific daily tasks. It provides enough room for creativity and organization without overwhelming your workspace or bag.

Larger Planners: Spacious Planning for Detailed Minds

For those who thrive on detailed planning and prefer a larger canvas, 8.5” x 11” planners provide an expansive layout. These planners offer more room for intricate notes, elaborate to-do lists, and detailed scheduling. The 8.5” x 11” size is the best planner choice for business owners who appreciate the luxury of extra space and find comfort in having a comprehensive overview of their business activities.

The format of a planner plays a crucial role in how effectively it helps you manage your business tasks. Consider whether you prefer a spiral-bound, softbound, ring binder, or digital planner. Fit your planner to your lifestyle and routine. If you are looking for a compact and portable planner you may want to opt for the softbound version. If your planner will be safely living on your desk then you might prefer the ring binder format.

Everyone has a different lifestyle and your best planner should fit into that routine and schedule. Make sure to look at the different formats of these yearly calendars and find your best fit.

The layout of a business planner determines how information is organized on each blank page. For both physical planners and digital planners, a daily planner is ideal for individuals with a high volume of tasks, while a weekly planner layout provides a broader view of the week ahead. Monthly planners are excellent for setting long-term goals and milestones.

The best planners come in various formats, ensuring you find the one that best fits your planning style. Some individuals prefer a structured layout with designated spaces for specific tasks, while others may prefer a more open and customizable design. Planners are known for their thoughtfully designed layouts that balance structure and flexibility, allowing you to tailor the planner to your unique needs.

Explore more planner layouts for work and all areas of your life.

Investing in a high-quality planner ensures durability and longevity, important factors for a tool you'll be using daily. High-quality planners consist of premium materials, sturdy covers, and thick, high-quality paper.

In a world filled with digital planners a well-constructed paper planner not only withstands the wear and tear of daily use but also provides a satisfying tactile experience.

Personalization Options

A personalized productivity planner can add a touch of your personality to your daily routine. Offering a range of customization options, allowing you to choose the cover design, color scheme, and even add your name or a motivational quote. Personalizing your productivity planner can make it feel more like a reflection of your identity, motivating you to use it consistently.

Learn more about how to start planning .

The Best Planners for Business Owners and Entrepreneurs

Life Planner

The LifePlanner™ is a popular choice among business owners and entrepreneurs for its versatility and comprehensive layout. In this list of best planners, the LifePlanner™ is one of the only options with monthly, weekly, and yearly planning sections, it accommodates various planning preferences. The colorful and stylish design adds a touch of creativity to your planning sessions, making it an inspiring tool for achieving your personal goals.

Focused Planner

For those who prefer a more specialized approach, the Focused Planner is designed to help you concentrate on specific areas of your business. It includes dedicated sections for goal setting, project planning, and tracking key performance indicators. This focused approach can be particularly beneficial for entrepreneurs with targeted objectives or ongoing projects.

A5 Weekly Planner Ring Agenda

The A5 Weekly Planner Ring Agenda is a compact and portable solution for busy entrepreneurs on the move. Its industry-standard six-ring binding allows for easy customization and rearrangement of pages, ensuring that your planner adapts to your evolving needs. Despite its smaller size, it doesn't compromise on functionality, providing ample space for weekly planning.

The A5 LifePlanner™ Ring Agenda may be the perfect planner fit.

Custom Monthly Planner

For those who prefer a simplified approach to planning, the Custom Monthly Planner is a clean and minimalist design. It allows you to focus on high-level goals and priorities without the distraction of daily or weekly details. This option is the perfect choice for entrepreneurs who want a bird's eye view of their month at a glance.

Learn more about daily, weekly, and monthly planning tips .

Tips for Using a Business Planner

Streamlining Tasks and Responsibilities

One of the primary purposes of a business planner is to streamline your tasks and responsibilities. Use designated sections for to-do lists, deadlines, and important meetings to ensure nothing falls through the cracks. The planners, with their well-thought-out layouts, provide dedicated spaces for these essential elements of your business routine.

Enhancing Time Management and Productivity

Effective time management is a cornerstone of successful entrepreneurship. Use your planner to allocate specific time blocks for different tasks, helping you stay organized and focused throughout the day. Erin Condren's planners often include features like hourly layouts, ensuring that you can plan your day with precision.

Keeping Track of Important Tasks and Events

As a business owner, it's crucial to keep track of important day-to-day tasks and events that contribute to the growth of your venture. Utilize the monthly and yearly planning sections in your planner to mark significant milestones, deadlines, and business-related events. Having a visual representation of your schedule helps you stay proactive and prepared.

Setting Goals and Priorities

Goal-setting is a fundamental aspect of business success. Use the goal-setting pages in your planner to outline both short-term and long-term objectives. Breaking down larger goals into actionable steps can make them more manageable and achievable. You can find an assortment of planners that include goal-specific sections to guide you through this process.

Organizing Creative Ideas

Entrepreneurship often involves creative thinking and innovation. Use a dedicated section in your planner to jot down creative ideas, brainstorming sessions, and insights. Customizable planners allow you to integrate creativity into your planning process, making it a holistic tool for both analytical and imaginative aspects of business.

Having the right tools can make a significant impact on your success in the business world. A well-chosen business planner not only keeps you organized but also serves as a motivational tool to propel you to reach your goals .

With the diverse range of options offered in the market, you can find a planner that aligns with your unique needs and preferences. Take your time to explore the the best planners that resonate with your style and goals and start the healthy habit of enhanced productivity and business success.

You may also enjoy these business planning tips and productivity hacks:

• How to Start a Business
• How to Use a Planner for Home + Work
• How to Stay Organized at Work

Shop now. Pay in 4. Always interest-free.

Add your favorites to bag

Select Afterpay at Checkout

Log into or create your Afterpay account, instant approval decision

Your purchase will be split into 4 payments, payable every 2 weeks

You must be over 18, a resident of the U.S. and meet additional eligibility criteria to qualify. Late fees may apply. Estimated payment amounts shown on product pages exclude taxes and shipping charges, which are added at checkout. Click here for complete terms. Loans to California residents made or arranged pursuant to a California Finance Lenders Law license. © 2020 Afterpay

Pay in 4 interest-free payments

No impact on credit score and no late fees. Available for purchases of $30 to $1,500.

• Choose PayPal at checkout to pay later with Pay in 4 .
• Complete your purchase with a 25% down payment.
• Use autopay for the rest of your payments. It's easy!

Pay in 4 is available to consumers upon approval for purchases of $30 to $1,500. Pay in 4 is currently not available to residents of MO or NVMissouri or Nevada. Offer availability depends on the merchant and also may not be available for certain recurring, subscription services. When applying, a soft credit check may be needed, but will not affect your credit score. You must be 18 years old or older to apply. PayPal, Inc.: Loans to CACalifornia residents are made or arranged pursuant to a CACalifornia Financing Law License. GAGeorgia Installment Lender Licensee, NMLS #910457. RIRhode Island Small Loan Lender Licensee. NMNew Mexico residents:

Find more disclosures related to Pay in 4.

• Search Search Please fill out this field.
• Association Retirement Plan
• Multiple Employer Rule

Bona Fide Group or Association

• Professional Employer Org.
• Self-Employed Working Owners

What You Can Do Now

The bottom line.

• Retirement Planning

Small Business 401(k)s: How to Leverage the Multiple Employer DOL Rule

Businesses can now share the costs of setting up a joint 401(k) plan

Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.

• Best Strategies to Maximize Your 401(k)
• What Return Rate Should I Expect on my 401(k) Returns
• 401(k) Fees: Everything You Need to Know
• Best Ways to Use Your 401(k) Without a Penalty
• Income Limits for 401(k)s: Highly Compensated Employees
• What to Do After You've Over-Contributed to Your 401(k)
• Divorce and 401(k): What You Need to Know
• Average 401(k) Balance by Age
• What to Do After You Max Out Your Plan
• How Do 401(k) Catch-Up Contributions Work?
• How 401(k) Works After Retirement
• 401(k) Taxes When You Retire
• Can Your 401(k) Impact Your Social Security Benefits?
• Managing Your Own 401(k)
• What is a Solo 401(k) or Self-Employed 401(k)?
• SIMPLE 401(k) Plans
• Small Business 401(k)s: How to Leverage the Muliple Employer DOL Rule CURRENT ARTICLE
• Can I Fund a Roth IRA and Contribute to My Employer's Retirement Plan?
• Must-Know Rules for Converting Your 401(k) to a Roth IRA
• What Are the Risks of Rolling My 401(k) Into an Annuity

If you own or are employed by a small business—and are among the approximately 38 million people in the U.S. with no access to a retirement plan at work—you may be interested in the U.S. Department of Labor (DOL) rule that took effect Sept. 30, 2019.  

This rule clarified how small and medium companies, as well as individual “working owners,” can participate in a defined-contribution retirement account such as a 401(k) by joining what is known as an association retirement plan (ARP).

Key Takeaways

• A 2019 DOL rule made it easier and less expensive for small business owners to offer a 401(k) to their employees.
• Self-employed working owners are also eligible to participate in these plans.
• The DOL rule created a new kind of multiple employer plan (MEP) called an association retirement plan (ARP).
• An ARP lets companies in different industries join to open a group 401(k) if they are in the same geographic area.
• Companies in the same industry can open a plan no matter where they have a physical presence.

Association Retirement Plan (ARP) Explained

An ARP is a new form of multiple employer plan (MEP), a retirement savings plan involving two or more unrelated employers. Until the creation of ARPs, MEPs limited members to employers with certain connections, such as a common owner or membership in an industry trade group. In that sense, MEPs are considered “closed.”

The DOL multiple employer rule makes it easier for small employers to offer a retirement plan to employees by expanding the rules to include companies in different industries with a physical presence in the same geographic area (city, county, region, or state) or companies in the same industry even if not in the same geographic area.

The DOL created the rule by interpreting previously unclear guidelines under the Employee Retirement Income Security Act (ERISA) of 1974. It’s important to understand that, even with the new interpretation, an ARP is still not a fully “open” MEP, in which the only thing employers have in common is participation in the plan.

The National Compensation Survey of Employee Benefits in the U.S. in March 2023 revealed that 68% of private industry nonunion workers have access to retirement benefits.

Breaking Down the Multiple Employer Rule

Under the DOL rule, an ARP can be offered and administrated by a “bona fide” group or association of employer members, such as a chamber of commerce , or by a professional employer organization (PEO). PEOs are human-resource companies that take on certain employment responsibilities for member businesses.

Banks, insurance companies, broker-dealers, record keepers, and companies that provide retirement plan products are not currently permitted to participate.

A bona fide group or PEO acts as a single employer for all employees of member companies for purposes of sponsoring and administering the ARP. The only types of retirement plans allowed are defined-contribution plans, such as a 401(k). In addition to employees and owners of member companies, qualified self-employed working owners may also join the ARP.

To qualify as a bona fide group or association, an organization must act in the interest of member companies or working owners and agree to establish a benefit program. It must control the amendment process and plan termination and perform other functions on behalf of members. It must also have a close economic or other connection unrelated to the 401(k) plan or other benefits.

In other words, it must be a bona fide business organization that shares a common interest with member businesses unrelated to benefits.

The DOL further requires that employer members of the organization exercise control over the benefit plan, both in form and substance. Examples of bona fide organizations include a local chamber of commerce or other local, state, or national professional organization or trade group.

Professional Employer Organization (PEO)

A PEO acts “in the interest of” client companies to provide a variety of financial and human resources services to client companies including federal tax withholding, Internal Revenue Service (IRS) reporting, payroll functions, employment responsibilities, and more. Many PEOs already offer MEPs. The DOL rule essentially provides a safe harbor for “bona fide” PEOs to continue or begin taking on that responsibility moving forward.

To be considered “bona fide,” a PEO must meet four requirements: that it perform substantial employment functions on behalf of its clients, have substantial control over the MEP or ARP, ensure that each client company has at least one employee who participates in the plan, and offer the plan only to those clients and their employees.

Qualified Self-Employed Working Owners

If you are a self-employed working owner, the rule allows you to join an ARP established and maintained by a bona fide group or organization (such as a local chamber of commerce) but not one maintained by a PEO. To be considered qualified, you must work at your business at least 20 hours per week or 80 hours per month, on average, or earn income at a certain level.

In the case of earned income, the requirement is that you earn enough to cover the cost of an association health plan (AHP) provided by the ARP. It’s worth noting that you don’t have to participate in the AHP, just earn enough to pay the cost of coverage if you decide to use earned income instead of hours worked as your metric.

If you’re an employer or self-employed “working owner,” consider potential existing organizations you belong to that might qualify as a bona fide group or association for purposes of offering an ARP. At the top of your list should be the local or state chamber of commerce. Trade and industry groups could form other opportunities. Remember that local organizations can include companies or businesses in any industry. National groups must be related to your specific industry.

As a small business owner (self-employed worker-owners aren’t eligible), you may want to consider hiring a PEO that meets your business needs and offers an ARP as part of the package. To find out more about PEOs, check out the National Association of Professional Employer Organizations (NAPEO)’s Guidelines for Choosing a PEO.

What Is an Association Retirement Plan (ARP)?

An association retirement plan (ARP) is a new type of multiple employer plan that was created by a 2019 Department of Labor rule. This rule makes 401(k)s more within reach for small businesses and self-employed working owners.

How Does an Association Retirement Plan Work?

A professional employer organization (PEO) or a bona fide group takes on the responsibility to administer the association retirement plan (ARP) for its member businesses and qualified self-employed working owners. The PEO or bona fide group is the employer for the purposes of administering the ARP, which is a defined-contribution plan, such as a 401(k).

How Did the SECURE Act Change Multiple Employer Plans?

The Setting Every Community Up for Retirement Enhancement (SECURE) Act legislation goes much further than the 2019 DOL rule when it comes to access to multiple employer plans (MEPs) by unrelated employers. It created “open” MEPs that allow companies that are not in the same geographic area and aren’t part of the same trade, industry, or profession to join the same MEP. The act also permits MEPs to be administered by a “pooled plan provider,” such as a financial services firm.

The SECURE Act also eliminated the “one bad apple rule.” The Act also says the provider must be the named fiduciary and plan administrator and register with the DOL or IRS.

Despite the advantages, there are reasons for caution when considering joining an ARP. Also, you may discover non-ARP alternatives using new technology and software that may make setting up your own retirement plan less expensive than you think.

All that said, the DOL rule makes it possible for small businesses to access competitive benefits packages at potentially lower costs and without much of the paperwork that typically comes with such ventures. At the very least an ARP may be worth exploring to see if it makes sense for you and your company.

Federal Register. " Definition of “Employer” Under Section 3(5) of ERISA-Association Retirement Plans and Other Multiple-Employer Plans ."

Department of Labor. " Fact Sheet: Final Rule on Association Retirement Plans (ARPs) ."

Bureau of Labor Statistics. " Employee Benefits in the United States, March 2023 ."

National Association of Professional Employer Organizations. " Guidelines for Choosing a PEO. "

• Terms of Service
• Editorial Policy
• Privacy Policy

• Creating a Small Business Financial Plan

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on September 02, 2023

Are You Retirement Ready?

Table of contents, financial plan overview.

A financial plan is a comprehensive document that charts a business's monetary objectives and the strategies to achieve them. It encapsulates everything from budgeting and forecasting to investments and resource allocation.

For small businesses, a solid financial plan provides direction, helping them navigate economic challenges, capitalize on opportunities, and ensure sustainable growth.

The strength of a financial plan lies in its ability to offer a clear roadmap for businesses.

Especially for small businesses that may not have a vast reserve of resources, prioritizing financial goals and understanding where every dollar goes can be the difference between growth and stagnation.

It lends clarity, ensures informed decision-making, and sets the stage for profitability and success.

Understanding the Basics of Financial Planning for Small Businesses

Role of financial planning in business success.

Financial planning is the backbone of any successful business endeavor. It serves as a compass, guiding businesses toward profitability, stability, and growth.

With proper financial planning, businesses can anticipate potential cash shortfalls, make informed investment decisions, and ensure they have the capital needed to seize new opportunities.

For small businesses, in particular, tight financial planning can mean the difference between thriving and shuttering. Given the limited resources, it's vital to maximize every dollar and anticipate financial challenges.

Through diligent planning, small businesses can position themselves competitively, adapt to market changes, and drive consistent growth.

Core Components of a Financial Plan for Small Businesses

Every financial plan comprises several core components that, together, provide a holistic view of a business's financial health and direction. These include setting clear objectives, estimating costs , preparing financial statements , and considering sources of financing.

Each component plays a pivotal role in ensuring a thorough and actionable financial strategy .

For small businesses, these components often need a more granular approach. Given the scale of operations, even minor financial missteps can have significant repercussions.

As such, it's essential to tailor each component, ensuring they address specific challenges and opportunities that small businesses face, from initial startup costs to revenue forecasting and budgetary constraints.

Setting Clear Small Business Financial Objectives

Identifying business's short-term and long-term financial goals.

Every business venture starts with a vision. Translating this vision into actionable financial goals is the essence of effective planning.

Short-term goals could range from securing initial funding and achieving a set monthly revenue to covering startup costs. These targets, usually spanning a year or less, set the immediate direction for the business.

On the other hand, long-term financial goals delve into the broader horizon. They might encompass aspirations like expanding to new locations, diversifying product lines, or achieving a specific market share within a decade.

By segmenting goals into short-term and long-term, businesses can craft a step-by-step strategy, making the larger vision more attainable and manageable.

Understanding the Difference Between Profitability and Cash Flow

Profitability and cash flow, while closely linked, are distinct concepts in the financial realm. Profitability pertains to the ability of a business to generate a surplus after deducting all expenses.

It's a metric of success and indicates the viability of a business model . Simply put, it answers whether a business is making more than it spends.

In contrast, cash flow represents the inflow and outflow of cash within a business. A company might be profitable on paper yet struggle with cash flow if, for instance, clients delay payments or unexpected expenses arise.

For small businesses, maintaining positive cash flow is paramount. It ensures that they can cover operational costs, pay employees, and reinvest in growth, even if they're awaiting payments or navigating financial hiccups.

Estimating Small Business Startup Costs (for New Businesses)

Fixed vs variable costs.

When embarking on a new business venture, understanding costs is paramount. Fixed costs remain consistent regardless of production levels. They include expenses like rent, salaries, and insurance . These are predictable outlays that don't fluctuate with business performance.

Variable costs , conversely, change in direct proportion to production or business activity. Think of costs associated with materials for manufacturing or commission for sales .

For a startup, delineating between fixed and variable costs aids in crafting a more dynamic budget, allowing for adaptability as the business scales and evolves.

One-Time Expenditures vs Ongoing Expenses

Startups often grapple with numerous upfront costs. From purchasing equipment and setting up a workspace to initial marketing campaigns, these one-time expenditures lay the foundation for business operations.

They differ from ongoing expenses like utility bills, raw materials, or employee wages that recur monthly or annually.

For a small business owner, distinguishing between these costs is critical. One-time expenditures often demand a larger chunk of initial capital, while ongoing expenses shape the monthly and annual budget.

By categorizing them separately, businesses can strategize funding needs more effectively, ensuring they're equipped to meet both immediate and recurrent financial obligations.

Funding Sources for Small Businesses

Personal savings.

This is often the most straightforward way to fund a startup. Entrepreneurs tap into their personal savings accounts to jumpstart their business.

While this method has the benefit of not incurring debt or diluting company ownership, it intertwines the individual's personal financial security with the business's fate.

The entrepreneur must be prepared for potential losses, and there's the evident psychological strain of putting one's hard-earned money on the line.

Loans can be sourced from various institutions, from traditional banks to credit unions . They offer a substantial sum of money that can be paid back over time, usually with interest .

The main advantage of taking a loan is that the entrepreneur retains full ownership and control of the business.

However, there's the obligation of monthly repayments, which can strain a business's cash flow, especially in its early days. Additionally, securing a loan often requires collateral and a sound credit history.

Investors, including angel investors and venture capitalists , offer capital in exchange for equity or a stake in the company.

Angel investors are typically high-net-worth individuals who provide funding in the initial stages, while venture capitalists come in when there's proven business potential, often injecting larger sums. The advantage is substantial funding without the immediate pressure of repayments.

However, in exchange for their investment, they often seek a say in business decisions, which might mean compromising on some aspects of the original business vision.

Grants are essentially 'free money' often provided by government programs, non-profit organizations, or corporations to promote innovation and support businesses in specific sectors.

The primary advantage of grants is that they don't need to be repaid, nor do they dilute company ownership. However, they can be highly competitive and might come with stipulations on how the funds should be used.

Moreover, the application process can be lengthy and requires showcasing the business's potential or alignment with the specific goals or missions of the granting institution.

Preparing Key Financial Statements for Small Businesses

Income statement (profit & loss).

An Income Statement , often termed as the Profit & Loss statement , showcases a business's financial performance over a specific time frame. It details revenues , expenses, and ultimately, profits or losses.

By analyzing this statement, business owners can pinpoint revenue drivers, identify exorbitant costs, and understand the net result of their operations.

For small businesses, this document is instrumental in making informed decisions. For instance, if a certain product line is consistently unprofitable, it might be prudent to discontinue it. Conversely, if another segment is thriving, it might warrant further investment.

The Income Statement, thus, serves as a financial mirror, reflecting the outcomes of business strategies and decisions.

Balance Sheet

The Balance Sheet offers a snapshot of a company's assets , liabilities , and equity at a specific point in time.

Assets include everything the business owns, from physical items like equipment to intangible assets like patents .

Liabilities, on the other hand, encompass what the company owes, be it bank loans or unpaid bills.

Equity represents the owner's stake in the business, calculated as assets minus liabilities.

This statement is crucial for small businesses as it offers insights into their financial health. A robust asset base, minimal liabilities, and growing equity signify a thriving enterprise.

In contrast, mounting liabilities or dwindling assets could be red flags, signaling the need for intervention and strategy recalibration.

Cash Flow Statement

While the Income Statement reveals profitability, the Cash Flow Statement tracks the actual movement of money.

It categorizes cash flows into operating (day-to-day business), investing (buying/selling assets), and financing (loans or equity transactions) activities. This statement unveils the liquidity of a business, indicating whether it has sufficient cash to meet immediate obligations.

For small businesses, maintaining positive cash flow is often more vital than showcasing profitability.

After all, a business might be profitable on paper yet struggle if clients delay payments or unforeseen expenses emerge.

By regularly reviewing the Cash Flow Statement, small business owners can anticipate cash crunches and strategize accordingly, ensuring seamless operations irrespective of revenue cycles.

Small Business Budgeting and Expense Management

Importance of budgeting for a small business.

Budgeting is the financial blueprint for any business, detailing anticipated revenues and expenses for a forthcoming period. It's a proactive approach, enabling businesses to allocate resources efficiently, plan for investments, and prepare for potential financial challenges.

For small businesses, a meticulous budget is often the linchpin of stability, ensuring they operate within their means and avoid financial pitfalls.

Having a well-defined budget also fosters discipline. It curtails frivolous spending, emphasizes cost-efficiency, and sets clear financial boundaries.

For small businesses, where every dollar counts, a stringent budget is the gateway to financial prudence, ensuring that funds are utilized judiciously, fostering growth, and minimizing wastage.

Strategies for Reducing Costs and Optimizing Expenses

Bulk purchasing.

When businesses buy supplies in large quantities, they often benefit from discounts due to economies of scale . This can significantly reduce per-unit costs.

However, while bulk purchasing leads to immediate savings, businesses must ensure they have adequate storage and that the products won't expire or become obsolete before they're used.

Renegotiating Vendor Contracts

Regularly reviewing and renegotiating contracts with suppliers or service providers can lead to better terms and lower costs. This might involve exploring volume discounts, longer payment terms, or even bartering services.

Building strong relationships with vendors often paves the way for such negotiations.

Adopting Energy-Saving Measures

Simple changes, like switching to LED lighting or investing in energy-efficient appliances, can lead to long-term savings in utility bills. Moreover, energy conservation not only reduces costs but also minimizes the environmental footprint, which can enhance the business's reputation.

Embracing Technology

Modern software and technology can streamline business processes. Automation tools can handle repetitive tasks, reducing labor costs.

Meanwhile, data analytics tools can provide insights into customer preferences and behavior, ensuring that marketing budgets are used effectively and target the right audience.

Streamlining Operations

Regularly reviewing and refining business processes can eliminate redundancies and improve efficiency. This might mean merging roles, cutting down on unnecessary meetings, or simplifying supply chains. A leaner operation often translates to reduced expenses.

Outsourcing Non-core Tasks

Instead of maintaining an in-house team for every function, businesses can outsource tasks that aren't central to their operations.

For instance, functions like accounting , IT support, or digital marketing can be outsourced to specialized agencies, often leading to cost savings and access to expert skills.

Cultivating a Culture of Frugality

Encouraging employees to adopt a cost-conscious mindset can lead to collective savings. This can be fostered through incentives, regular training, or even simple practices like recycling and reusing office supplies.

When everyone in the organization is attuned to the importance of cost savings, the cumulative effect can be substantial.

Forecasting Small Business Revenue and Cash Flow

Techniques for predicting future sales in a small business, past sales data analysis.

Historical sales data is a foundational element in any forecasting effort. By reviewing previous sales figures, businesses can identify patterns, understand seasonal fluctuations, and recognize the effects of past initiatives.

This information offers a baseline upon which to build future projections, accounting for known recurring variables in the business cycle .

Market Research

Understanding the larger market dynamics is crucial for accurate forecasting. This involves tracking industry trends, monitoring shifts in consumer behavior, and being aware of potential market disruptions.

For instance, a sudden technological advancement can change consumer preferences or regulatory changes might impact an industry.

Local Trend Analysis

For small businesses, localized insights can be especially impactful. Observing local competitors, understanding regional consumer preferences, or noting shifts in the local economy can offer precise data points.

These granular details, when integrated into a larger forecasting model, can enhance prediction accuracy.

Customer Feedback

Direct feedback from customers is an invaluable source of insights. Surveys, focus groups, or even informal chats can reveal customer sentiments, preferences, and potential future purchasing behavior.

For instance, if a majority of loyal customers express interest in a new product or service, it can be indicative of future sales potential.

Moving Averages

This technique involves analyzing a series of data points (like monthly sales) by creating averages from different subsets of the full data set.

For yearly forecasting, a 12-month moving average can be used to smooth out short-term fluctuations and highlight longer-term trends or cycles.

Regression Analysis

Regression analysis is a statistical tool used to identify relationships between variables. In sales forecasting, it can help understand how different factors (like marketing spend, seasonal variations, or competitor actions) relate to sales figures.

Once these relationships are understood, businesses can predict future sales based on planned actions or expected external events.

Understanding the Cash Cycle of Business

The cash cycle encompasses the time it takes for a business to convert resource investments, often in the form of inventory, back into cash.

This involves the processes of purchasing inventory, selling it, and subsequently collecting payment. A shorter cycle implies quicker cash turnarounds, which are vital for liquidity.

For small businesses, a firm grasp of the cash cycle can aid in managing cash flow more effectively.

By identifying bottlenecks or delays, businesses can strategize to expedite processes. This might involve renegotiating payment terms with suppliers, offering discounts for prompt customer payments, or optimizing inventory levels to prevent overstocking.

Ultimately, understanding and optimizing the cash cycle ensures that a business remains liquid and agile.

Preparing for Seasonality and Unexpected Changes

Seasonality affects many businesses, from the ice cream vendor witnessing summer surges to the retailer bracing for holiday shopping frenzies.

By analyzing historical data and market trends, businesses can prepare for these cyclical shifts, ensuring they stock up, staff appropriately, and market effectively.

Small businesses, often operating on tighter margins , need to be especially vigilant. Beyond seasonality, they must also brace for unexpected changes – a local construction project obstructing store access, a sudden competitor emergence, or unforeseen regulatory changes.

Building a financial buffer, diversifying product or service lines, and maintaining flexible operational strategies can equip small businesses to weather these unforeseen challenges with resilience.

Securing Small Business Financing and Capital

Role of debt and equity financing.

When businesses seek external funding, they often grapple with the debt vs. equity conundrum. Debt financing involves borrowing money, typically via loans. While it doesn't dilute ownership, it necessitates regular interest payments, potentially impacting cash flow.

Equity financing, on the other hand, entails selling a stake in the business to investors. It might not demand regular repayments, but it dilutes ownership and might influence business decisions.

Small businesses must weigh these options carefully. While loans offer a structured repayment plan and retained control, they might strain finances if the business hits a rough patch.

Equity financing, although relinquishing some control, might bring aboard strategic partners, offering expertise and networks in addition to funds.

The optimal choice hinges on the business's financial health, growth aspirations, and the founder's comfort with sharing control.

Choosing Between Different Types of Loans

A staple in the lending arena, term loans offer businesses a fixed amount of capital that is paid back over a specified period with interest. They're often used for significant one-time expenses, such as purchasing machinery, real estate , or even business expansion.

With predictable monthly payments, businesses can plan their budgets accordingly. However, they might require collateral and a robust credit history for approval.

Lines of Credit

Unlike term loans that provide funds in a lump sum, a line of credit grants businesses access to a pool of funds up to a certain limit.

Businesses can draw from this line as needed, only paying interest on the amount they use. This makes it a versatile tool, especially for managing cash flow fluctuations or unexpected expenses. It serves as a financial safety net, ready for use whenever required.

As the name suggests, microloans are smaller loans designed to cater to businesses that might not need substantial amounts of capital. They're particularly beneficial for startups, businesses with limited credit histories, or those in need of a quick, small financial boost.

Since they are of a smaller denomination, the approval process might be more lenient than traditional loans.

Peer-To-Peer Lending

A contemporary twist to the traditional lending model, peer-to-peer (P2P) platforms connect borrowers directly with individual lenders or investor groups.

This direct model often translates to quicker approvals and competitive interest rates as the overheads of traditional banking structures are removed. With technology at its core, P2P lending can offer a more user-friendly, streamlined process.

However, creditworthiness still plays a pivotal role in determining interest rates and loan amounts.

Crowdfunding and Alternative Financing Options

In an increasingly digital age, crowdfunding platforms like Kickstarter or Indiegogo have emerged as viable financing avenues.

These platforms enable businesses to raise small amounts from a large number of people, often in exchange for product discounts, early access, or other perks. This not only secures funds but also validates the business idea and fosters a community of supporters.

Other alternatives include invoice financing, where businesses get an advance on pending invoices, or merchant cash advances tailored for businesses with significant credit card sales.

Each financing mode offers unique advantages and constraints. Small businesses must meticulously evaluate their financial landscape, growth trajectories, and risk appetite to harness the most suitable option.

Small Business Tax Planning and Management

Basic tax obligations for small businesses.

Navigating the maze of taxation can be daunting, especially for small businesses. Yet, understanding and fulfilling tax obligations is crucial.

Depending on the business structure—whether sole proprietorship , partnership , LLC , or corporation—different tax rules apply. For instance, while corporations are taxed on their earnings, sole proprietors report business income and expenses on their personal tax returns.

In addition to income taxes, small businesses may also be responsible for employment taxes if they have employees. This covers Social Security , Medicare , federal unemployment, and sometimes state-specific taxes.

There might also be sales taxes, property taxes, or special state-specific levies to consider.

Consistently maintaining accurate financial records, being aware of filing deadlines, and setting aside funds for tax obligations are essential practices to avoid penalties and ensure compliance.

Advantages of Tax Planning and Potential Deductions

Tax planning is the strategic approach to minimizing tax liability through the best use of available allowances, deductions, exclusions, and breaks.

For small businesses, effective tax planning can lead to significant savings.

This might involve strategies like deferring income to a later tax year, choosing the optimal time to purchase equipment, or taking advantage of specific credits available to businesses in certain sectors or regions.

Several potential deductions can reduce taxable income for small businesses. These include expenses like rent, utilities, business travel, employee wages, and even certain meals.

By keeping abreast of tax law changes and actively seeking out eligible deductions, small businesses can optimize their financial landscape, ensuring they're not paying more in taxes than necessary.

Importance of Hiring a Tax Professional or Accountant

While it's feasible for small business owners to manage their taxes, the intricate nuances of tax laws make it beneficial to consult professionals.

An experienced accountant or tax consultant can not only ensure compliance but can proactively recommend strategies to reduce tax liability.

They can guide businesses on issues like whether to classify someone as an employee or a contractor, how to structure the business for optimal taxation, or when to make certain capital investments.

Beyond just annual tax filing, these professionals offer year-round counsel, helping businesses maintain clean financial records, stay updated on tax law changes, and plan for future financial moves.

The investment in professional advice often pays dividends , saving businesses from costly mistakes, penalties, or missed financial opportunities.

Regularly Reviewing and Adjusting the Small Business Financial Plan

Setting checkpoints and milestones.

Like any strategic blueprint, a financial plan isn't static. It serves as a guiding framework but should be flexible enough to adapt to evolving business realities.

Setting regular checkpoints— quarterly , half-yearly, or annually—can help businesses assess whether they're on track to meet their financial objectives.

Milestones, such as reaching a specific sales target, launching a new product, or expanding into a new market, offer tangible markers of progress. Celebrating these victories can bolster morale, while any shortfalls can serve as lessons, prompting strategy tweaks. F

or small businesses, where agility is an asset, regularly revisiting the financial plan ensures that the business remains aligned with its overarching financial goals while being responsive to the dynamic marketplace.

Using Financial Ratios to Monitor Business Health

Financial ratios offer a distilled snapshot of a business's health. Ratios like the current ratio ( current assets divided by current liabilities ) can shed light on liquidity, indicating whether a business can meet short-term obligations.

The debt-to-equity ratio , contrasting borrowed funds with owner's equity, offers insights into the business's leverage and potential financial risk.

Profit margin , depicting profitability relative to sales, can highlight operational efficiency. By consistently monitoring these and other pertinent ratios, small businesses can glean actionable insights, understanding their financial strengths and areas needing attention.

In a realm where early intervention can stave off major financial setbacks, these ratios serve as vital diagnostic tools, guiding informed decision-making.

Pivoting Strategies Based on Financial Performance

In the ever-evolving world of business, flexibility is paramount. If financial reviews indicate that certain strategies aren't yielding anticipated results, it might be time to pivot.

This could involve tweaking product offerings, revising pricing strategies, targeting a different customer segment, or even overhauling the business model.

For small businesses, the ability to pivot can be a lifeline. It allows them to respond swiftly to market changes, customer feedback, or internal challenges.

A robust financial plan, while offering direction, should also be pliable, accommodating shifts in strategy based on real-world performance. After all, in the business arena, adaptability often spells the difference between stagnation and growth.

Bottom Line

Financial foresight is integral for the stability and growth of small businesses. Effective revenue and cash flow forecasting, anchored by historical sales data and enhanced by market research, local trends, and customer feedback, ensures businesses are prepared for future demands.

With the unpredictability of the business environment, understanding the cash cycle and preparing for unforeseen challenges is essential.

As businesses contemplate external financing, the decision between debt and equity and the myriad of loan types, should be made judiciously, keeping in mind the business's health, growth aspirations, and risk appetite.

Furthermore, diligent tax planning, with professional guidance, can lead to significant financial benefits. Regular reviews using financial ratios allow businesses to gauge their performance, adapt strategies, and pivot when necessary.

Ultimately, the agility to adapt, guided by a well-structured financial plan, is pivotal for businesses to thrive in a dynamic marketplace.

Creating a Small Business Financial Plan FAQs

What is the importance of a financial plan for small businesses.

A financial plan offers a structured roadmap, guiding businesses in making informed decisions, ensuring growth, and navigating financial challenges.

How do forecasting revenue and understanding cash cycles aid in financial planning?

Forecasting provides insights into expected income, aiding in budget allocation, while understanding cash cycles ensures effective liquidity management.

What are the core components of a financial plan for small businesses?

Core components include setting objectives, estimating startup costs, preparing financial statements, budgeting, forecasting, securing financing, and tax management.

Why is tax planning vital for small businesses?

Tax planning ensures compliance, optimizes tax liabilities through available deductions, and helps businesses save money and avoid penalties.

How often should a small business review its financial plan?

Regular reviews, ideally quarterly or half-yearly, ensure alignment with business goals and allow for strategy adjustments based on real-world performance.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

Related Topics

• Average Cost of a Certified Financial Planner
• Benefits of Having a Financial Planner
• Cash Flow Management
• Charitable Financial Planning
• Debt Reduction Strategies
• Disadvantages of Not Having a Financial Plan
• Divorce Financial Planning
• Education Planning
• Fee-Only Financial Planning
• Financial Contingency Planning
• Financial Planner Fee Structure
• Financial Planner for Retirement
• Financial Planning Pyramid
• Financial Planning Tips
• Financial Planning and Analysis
• Financial Planning and Investment
• Financial Planning for Allied Health Professionals
• Financial Planning for Married Couples
• Financial Planning for Military Families
• Financial Planning for Retirement
• Financial Planning for Startups
• Financial Planning in Your 20s
• Financial Planning vs Budgeting
• Financial Tips for Young Adults
• How to Build a 5-Year Financial Plan
• Limitations of Financial Planning
• Military Spouse Financial Planning
• The Function of a Financial Planner
• When Do You Need a Financial Planner?

Ask a Financial Professional Any Question

Meet top certified financial advisors near you, our recommended advisors.

Claudia Valladares

WHY WE RECOMMEND:

Fee-Only Financial Advisor Show explanation

Bilingual in english / spanish, founder of wisedollarmom.com, quoted in gobanking rates, yahoo finance & forbes.

IDEAL CLIENTS:

Retirees, Immigrants & Sudden Wealth / Inheritance

Retirement Planning, Personal finance, Goals-based Planning & Community Impact

Taylor Kovar, CFP®

Certified financial planner™, 3x investopedia top 100 advisor, author of the 5 money personalities & keynote speaker.

Business Owners, Executives & Medical Professionals

Strategic Planning, Alternative Investments, Stock Options & Wealth Preservation

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.

Fact Checked

At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content.

Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications.

They regularly contribute to top tier financial publications, such as The Wall Street Journal, U.S. News & World Report, Reuters, Morning Star, Yahoo Finance, Bloomberg, Marketwatch, Investopedia, TheStreet.com, Motley Fool, CNBC, and many others.

This team of experts helps Finance Strategists maintain the highest level of accuracy and professionalism possible.

Why You Can Trust Finance Strategists

Finance Strategists is a leading financial education organization that connects people with financial professionals, priding itself on providing accurate and reliable financial information to millions of readers each year.

We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources.

Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.

Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others.

Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs.

How It Works

Step 1 of 3, ask any financial question.

Ask a question about your financial situation providing as much detail as possible. Your information is kept secure and not shared unless you specify.

Step 2 of 3

Our team will connect you with a vetted, trusted professional.

Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.

Step 3 of 3

Get your questions answered and book a free call if necessary.

A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation.

Where Should We Send Your Answer?

Just a Few More Details

We need just a bit more info from you to direct your question to the right person.

Tell Us More About Yourself

Is there any other context you can provide.

Pro tip: Professionals are more likely to answer questions when background and context is given. The more details you provide, the faster and more thorough reply you'll receive.

What is your age?

Are you married, do you own your home.

• Owned outright
• Owned with a mortgage

Do you have any children under 18?

• Yes, 3 or more

What is the approximate value of your cash savings and other investments?

• $50k - $250k
• $250k - $1m

Pro tip: A portfolio often becomes more complicated when it has more investable assets. Please answer this question to help us connect you with the right professional.

Would you prefer to work with a financial professional remotely or in-person?

• I would prefer remote (video call, etc.)
• I would prefer in-person
• I don't mind, either are fine

What's your zip code?

• I'm not in the U.S.

Submit to get your question answered.

A financial professional will be in touch to help you shortly.

Part 1: Tell Us More About Yourself

Do you own a business, which activity is most important to you during retirement.

• Giving back / charity
• Spending time with family and friends
• Pursuing hobbies

Part 2: Your Current Nest Egg

Part 3: confidence going into retirement, how comfortable are you with investing.

• Very comfortable
• Somewhat comfortable
• Not comfortable at all

How confident are you in your long term financial plan?

• Very confident
• Somewhat confident
• Not confident / I don't have a plan

What is your risk tolerance?

How much are you saving for retirement each month.

• None currently
• Minimal: $50 - $200
• Steady Saver: $200 - $500
• Serious Planner: $500 - $1,000
• Aggressive Saver: $1,000+

How much will you need each month during retirement?

• Bare Necessities: $1,500 - $2,500
• Moderate Comfort: $2,500 - $3,500
• Comfortable Lifestyle: $3,500 - $5,500
• Affluent Living: $5,500 - $8,000
• Luxury Lifestyle: $8,000+

Part 4: Getting Your Retirement Ready

What is your current financial priority.

• Getting out of debt
• Growing my wealth
• Protecting my wealth

Do you already work with a financial advisor?

Which of these is most important for your financial advisor to have.

• Tax planning expertise
• Investment management expertise
• Estate planning expertise
• None of the above

Where should we send your answer?

Submit to get your retirement-readiness report., get in touch with, great the financial professional will get back to you soon., where should we send the downloadable file, great hit “submit” and an advisor will send you the guide shortly., create a free account and ask any financial question, learn at your own pace with our free courses.

Take self-paced courses to master the fundamentals of finance and connect with like-minded individuals.

Get Started

To ensure one vote per person, please include the following info, great thank you for voting., get in touch with a financial advisor, submit your info below and someone will get back to you shortly..

• Credit cards
• View all credit cards
• Banking guide
• Loans guide
• Insurance guide
• Personal finance
• View all personal finance
• Small business
• Small business guide
• View all taxes

You’re our first priority. Every time.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners .

How to Pay Yourself as a Business Owner

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

How to pay yourself as a business owner depends on the business structure, the stage of growth of your business and other factors.

While paying yourself may not be the first thing that comes to mind as you’re building a business, knowing the factors to consider and using the correct payment method can set you up for success as the business grows.

» MORE : NerdWallet's best small-business apps

Ways to pay yourself: Salary vs. owner’s draw

There are two main ways to pay yourself as a business owner:

Salary : You pay yourself a regular salary just as you would an employee of the company, withholding taxes from your paycheck. This is legally required for businesses that are structured as S-corporations or C-corporations or a limited liability company taxed as a corporation. The IRS has a “reasonable” compensation requirement, which means your salary should be comparable with what someone else doing the same job in your industry would be paid.

Owner’s draw : You draw money (in cash or in kind) from the profits of your business on an as-needed basis. You can draw up to the amount you put into the company, which is known as owner’s equity. You don’t have to pay taxes upfront every time you take a draw but it’s wise to set aside money regularly to budget for your tax bill.

Here’s a comparison of both methods:

There are other methods of taking money from your business, such as dividends and distributions. Whether and how you can use these methods depends on the structure of your business. An accountant can advise you on the pros and cons of each.

How to decide

These factors determine how you pay yourself.

Business structure

Your specific business structure, whether it's a sole proprietorship, a partnership, LLC, an S-corp or a C-corp, dictates whether you can take a salary and/or an owner’s draw. Typically, you can take an owner’s draw if you have a sole proprietorship, partnership or an LLC, and you can take a salary when your business is a corporation or an LLC taxed as a corporation. An accountant can walk you through the requirements and tax advantages of your business structure.

Business stage

Many entrepreneurs don't take any money in the early stages of their business. But as soon as your business is on firmer footing or you have a good sense of cash flow, start thinking about paying yourself so that you can factor that amount into the business's operating expenses.

Personal finances

The payment amount and method you use should cover all your personal obligations, such as a mortgage, car loan and basic expenses. If your finances aren’t strong or you aren’t paying yourself at all, that may put you at a disadvantage when seeking small-business financing .

How much should you pay yourself?

Once you’ve decided how to pay yourself, you need to pick an amount. The average entrepreneur makes about $68,000 a year, based on self-reported salaries at Payscale, a compensation software company.

If you’re taking an owner’s draw, your pay should come from the business's net profit, which is revenue minus all operational expenses. That ensures you meet all business obligations (including paying employees, if you have them) before paying yourself. One rule of thumb is to pay yourself a fixed percentage of the business's profit so that your compensation can adjust according to the performance of your business.

» MORE: NerdWallet's best payroll software for small businesses

Mistakes to avoid while paying yourself

Mixing personal and business finances.

This is a basic tenet of business: Always keep your personal and business accounts separate. Using a business credit card to pay for your personal expenses or not actually transferring your pay or owner’s draw from your business account to a personal account can lead to accounting complications and hurt your chances of getting a small-business loan.

Not budgeting for taxes

If you are using the owner’s draw method, you should keep a part of every draw aside for taxes since they aren't deducted upfront. As a business owner, you also have to pay taxes on a quarterly basis; accounting software can typically help with that. If you don’t budget for it, you risk being hit with a big tax bill, and you may not have the cash on hand to pay.

Never paying yourself or being inconsistent about it

You may not pay yourself in the beginning, but ideally, your compensation should be part of your business plan. Your financial projections should include the amount of your salary or owner’s draw to help you understand what your business needs to grow.

On a similar note...

An official website of the United States government.

Here’s how you know

The .gov means it’s official. Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

The site is secure. The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

• Surprise Billing and Price Transparency
• COBRA Health Continuation Coverage
• Claiming Health Benefits
• Affordable Care Act
• Dependent Coverage
• Mental Health and Substance Use Disorder Benefits
• Health Benefits Compliance Assistance
• Children's Health Insurance Program Reauthorization Act (CHIPRA)
• Proposed Rescission of Association Health Plan Rule
• Special Financial Assistance - Multiemployer Plans
• Cybersecurity
• Missing Participants
• Saving Matters
• Claiming Retirement Benefits
• Funding Status Notices
• Lifetime Income
• Social Security Notices
• Delinquent Filer Voluntary Compliance Program (DFVCP)
• Audit Quality
• Compliance Assistance
• Educational Seminars and Webinars
• Compliance Assistance Guides
• Changing Jobs and Job Loss
• Marriage and Domestic Partnerships
• Childbirth & Adoption
• Loss of Dependent Coverage
• Separation and Divorce
• Death of a Family Member
• Preparing for Retirement
• Disaster Relief
• Additional Protections
• Plan Administration and Compliance
• Small Business
• Research Papers
• Other Collaboration
• Advisory Opinions
• Amicus Briefs
• Fact Sheets
• Information Letters
• News Releases
• Publications
• Social Media Toolkit
• Federal Register Notices
• Technical Appendices
• Code of Federal Regulations
• Regulations Open for Comment
• Public Comments
• Regulatory Agenda
• Peer Review
• Organizational Chart
• Programs and Initiatives
• Enforcement
• ERISA Advisory Council
• State All Payer Claims Databases Advisory Committee (SAPCDAC)
• Find a Regional Office
• Freedom of Information Act
• 1-866-444-3272

401(k) Plans For Small Businesses

Printer Friendly Version

Why 401(k) Plans?

401(k) plans can be a powerful tool to promote financial security in retirement. They are a valuable option for businesses considering a retirement plan, as they provide benefits to both employees and their employers.

A 401(k) plan:

• Helps attract and keep talented employees.
• Allows participants to decide how much to contribute to their accounts.
• Benefits a mix of rank-and-file employees and owners/managers.
• Helps money grow through investments in stocks, bonds, mutual funds, money market funds, savings accounts, and other investment vehicles.
• Offers significant tax advantages (including deduction of employer contributions and deferred taxation on contributions and earnings until distribution).
• Allows participants to take their benefits with them when they leave the company, easing administrative responsibilities.

This publication provides an overview of 401(k) plans. For more information, resources for both you and your employees are listed at the end of this booklet.

Establishing a 401(k) Plan

When you establish a 401(k) plan, you must take certain basic actions. One of your first decisions will be whether to set up the plan yourself or to consult a professional or financial institution – such as a bank, mutual fund provider, or insurance company – to help you establish and maintain the plan. In addition, there are four initial steps for setting up a 401(k) plan:

• Adopt a written plan document,
• Arrange a trust for the plan's assets,
• Develop a recordkeeping system, and
• Provide plan information to eligible employees.

Adopt a written plan document – Plans begin with a written document that serves as the foundation for day-to-day plan operations. If you hired someone to help with your plan, they will likely provide the document. If not, consider getting assistance from a financial institution or retirement plan professional. In either case, you will be bound by the terms of the plan document.

Once you have decided on a 401(k) plan, you will need to choose the type of plan best for you – a traditional 401(k) plan, a safe harbor 401(k) plan, or an automatic enrollment 401(k) plan. In all the plans, participants can contribute through salary deductions.

A traditional 401(k) plan offers the most flexibility. Employers can decide whether to contribute for all participants, to match employees' deferrals, to do both, or to do neither. These contributions can be subject to a vesting schedule, which means an employee only has a right to employer contributions after a certain amount of time. Annual testing ensures that benefits for rank-and-file employees are proportional to benefits for owners/managers.

Safe harbor 401(k) plans are not subject to the annual contributions testing that traditional 401(k) plans require. In exchange for avoiding annual testing, employees in these plans must receive a certain level of employer contributions. Under the most popular safe harbor 401(k) plan, employees are immediately vested in employer contributions.

An automatic enrollment 401(k) plan allows you to automatically enroll employees and place their salary deductions in certain default investments unless the employee elects otherwise. This is an effective way for employers to increase participation in their 401(k) plans.

The traditional, safe harbor, and automatic enrollment plans are for employers of any size.

This booklet addresses traditional and safe harbor 401(k) plans. For more information on automatic enrollment 401(k) plans, see Automatic Enrollment 401(k) Plans for Small Businesses (Publication 4674).

Once you have decided on the type of plan for your company, you have flexibility in choosing some of the plan's features, such as which employees can contribute to the plan and how much. Other features are required by law. For instance, the plan document must describe certain key processes, such as how contributions are deposited in the plan.

Arrange a trust for the plan's assets – A plan's assets must be held in trust to assure that the assets are used solely to benefit the participants and their beneficiaries. The trust must have at least one trustee to handle contributions, plan investments, and distributions. Because the financial integrity of the plan depends on the trustee, selecting a trustee is one of the most important decisions you will make in establishing a 401(k) plan. If you set up your plan through insurance contracts, the contracts do not need to be held in trust.

Develop a recordkeeping system – An accurate recordkeeping system will track and properly attribute contributions, earnings, losses, plan investments, expenses, and benefit distributions. If a contract administrator or financial institution assists in managing the plan, that entity typically will help keep the required records. In addition, a recordkeeping system will help you, your plan administrator, or your financial provider prepare the plan's annual return/report that must be filed with the Federal Government.

Provide plan information to employees eligible to participate – You must notify employees who are eligible to participate in the plan about certain benefits, rights, and features.

In addition, a summary plan description (SPD) must be provided to all participants. The SPD is the primary way to inform participants and beneficiaries about the plan and how it operates. It typically is created with the plan document. (For more information on the required contents of the SPD, see Disclosing Plan Information to Participants .)

You also may want to provide your employees with information that discusses the advantages of your 401(k) plan. The benefits to employees – such as pretax contributions to a 401(k) plan (or tax-free distributions in the case of Roth contributions), employer contributions (if you choose to make them), and compounded tax-deferred earnings – help highlight the advantages of participating in the plan.

A 401(k) plan may be established as late as the due date (including extensions) of the company's income tax return for the year you want to establish the plan.

For example, if your business's fiscal year ends on December 31, 2022, and you filed for the automatic 6-month extension, the company's tax return would be due on October 15, 2023. You could adopt a plan in 2023 as late as October 15 and make it effective on December 31, 2022. You're not allowed to have 401(k) salary deferrals prior to the date you adopt a 401(k) plan. However, you could make an initial profit sharing contribution to the 401(k) plan for 2022, no later than October 15, 2023.

Operating a 401(k) Plan

Once you establish a 401(k) plan, you assume certain responsibilities in operating it. If you hired someone to help set up your plan, that arrangement also may include help in operating the plan. If not, you'll need to decide whether to manage the plan yourself or to hire a professional or financial institution to take care of some or most aspects of operating the plan.

Elements of operating 401(k) plans include:

Participation

Contributions, nondiscrimination.

• Investing the contributions
• Fiduciary responsibilities
• Disclosing plan information to participants
• Reporting to government agencies
• Distributing plan benefits

Typically, a plan includes a mix of rank-and-file employees and owners/managers. However, a 401(k) plan may exclude some employees if they:

• Are younger than 21,
• Have completed less than 1 year of service,
• Are covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining, or
• Are certain nonresident aliens.

In all 401(k) plans, participants can contribute through salary deductions. You can decide how much your business contributes to participants' accounts in the plan.

Traditional 401(k) Plan

If you decide to contribute to your 401(k) plan, you have options. You can contribute a percentage of each employee's compensation (a nonelective contribution), you can match the amount your employees contribute (a matching contribution), or you can do both.

For example, you may decide to add a matching contribution – say, 50 percent – to an employee's contribution, which results in a 50-cent increase for every dollar the employee sets aside.

Using a matching contribution formula will provide employer contributions only to employees who contribute to the 401(k) plan. If you choose to make nonelective contributions, the employer contribution goes to each eligible participant, whether or not the participant decides to contribute to their 401(k) plan account.

Under a traditional 401(k) plan, you have the flexibility of changing the amount of employer contributions each year, according to business conditions.

Safe Harbor 401(k) Plan

Under a safe harbor plan, you can match each eligible employee's contribution, dollar for dollar, up to 3 percent of the employee's compensation, and 50 cents on the dollar for the employee's contribution that exceeds 3 percent, but not 5 percent, of the employee's compensation.

Alternatively, you can make a nonelective contribution equal to 3 percent of compensation to each eligible employee's account.

Each year you must make either the matching contributions or the nonelective contributions. The plan document will specify which contributions will be made, and this information must be provided to employees before the beginning of each year.

Roth Contributions

401(k) plans may permit employees to make after-tax contributions through salary deduction. These designated Roth contributions, as well as gains and losses, are accounted for separately from pretax contributions. However, designated Roth contributions are treated the same as pretax contributions for most aspects of plan operations, such as contribution limits.

A 401(k) plan may allow participants to transfer certain amounts in the plan to their designated Roth account in the plan.

Contribution Limits

Employer and employee contributions and forfeitures (nonvested employer contributions of terminated participants) are subject to a per-employee overall annual limit. This limit is the lesser of:

• 100 percent of the employee's compensation, or
• $61,000 for 2022 and $66,000 for 2023.

In addition, the amount employees can contribute under any 401(k) plan is limited to $20,500 for 2022 and $22,500 for 2023. This includes both pre-tax employee salary deferrals and after-tax designated Roth contributions (if permitted under the plan).

All 401(k) plans may allow catch-up contributions of $6,500 for 2022 and $7,500 for 2023 for employees 50 and older.

Employee salary deferrals are immediately 100 percent vested – that is, the money that an employee has contributed to the plan cannot be forfeited. When an employee leaves employment, they are entitled to that money, plus any investment gains (or minus losses).

In safe harbor 401(k) plans, all required employer contributions are always 100 percent vested. In traditional 401(k) plans, you can design your plan so that employer contributions vest over time, according to a vesting schedule.

To preserve the tax benefits of a 401(k) plan, the plan must provide substantive benefits for rank-and-file employees, not just business owners and managers. These requirements are called nondiscrimination rules and compare both plan participation and contributions of rank-and-file employees to owners/managers.

Traditional 401(k) plans are subject to annual testing to ensure that the contributions made for rank-and-file employees are proportional to contributions made for owners and managers. In most cases, safe harbor 401(k) plans are not subject to annual nondiscrimination testing.

Investing the Contributions

After you decide on the type of 401(k) plan, you can consider the variety of investment options. In designing a plan, you will need to decide whether you will permit your employees to direct the investment of their accounts or if you will manage the monies on their behalf.

If you allow participants to direct their investments, you must decide what investment options to make available. Depending on the plan design you choose, you may want to hire someone either to determine the investment options or to manage the plan's investments. Continually monitoring the investment options ensures that your selections remain in the best interests of your plan and its participants.

Fiduciary Responsibilities

Many of the actions needed to operate a 401(k) plan involve fiduciary decisions. This is true whether you hire someone to manage the plan for you or do some or all of the plan management yourself. Controlling the assets of the plan or using discretion in administering and managing the plan makes you and the entity you hire a plan fiduciary. Providing investment advice for a fee also makes someone a fiduciary. Hiring someone to perform fiduciary functions is itself a fiduciary act. Fiduciary status is based on the functions performed for the plan, not a title.

Some decisions for a plan are business decisions, rather than fiduciary decisions. For instance, the decisions to establish a plan, to include certain features in a plan, to amend a plan, and to terminate a plan are business decisions. When making these decisions, you are acting on behalf of your business, not the plan, and therefore, you would not be a fiduciary. However, when you take steps to implement these decisions, you (or those you hire) are acting on behalf of the plan and, in carrying out these actions, may be a fiduciary.

Basic Responsibilities

Fiduciaries are in a position of trust with respect to the participants and beneficiaries in the plan. The fiduciary's responsibilities include:

• Acting solely in the interest of the participants and their beneficiaries;
• Acting for the exclusive purpose of providing benefits to workers participating in the plan and their beneficiaries;
• Paying only reasonable plan expenses;
• Carrying out duties with the care, skill, prudence, and diligence of a prudent person familiar with such matters;
• Following the plan documents; and
• Diversifying plan investments.

These are the responsibilities that fiduciaries need to keep in mind. The responsibility to be prudent covers a wide range of functions needed to operate a plan. Because all these functions must be carried out in the same way a prudent person would, you may want to consult experts in investments, accounting, and other fields, as appropriate.

In addition, for some functions, there are specific rules that help guide the fiduciary. For example, the deductions from employees' paychecks for contribution to the plan must be deposited with the plan as soon as reasonably possible, but no later than the 15th business day of the month following the payday. If you can reasonably make the deposits in a shorter time frame, you must do so.

For plans with fewer than 100 participants, salary reduction contributions deposited with the plan no later than the 7th business day following withholding by the employer will be considered contributed in compliance with the law.

For all contributions — employee and employer (if any) — the plan must designate a fiduciary, typically the trustee, to make sure that contributions due to the plan are transmitted. If the plan and other documents are not clear on this, the trustee generally has this responsibility. In addition, you (or those you hire) will need to update the plan document for changes in the law.

Limiting Liability

With these responsibilities, there is also some potential liability. However, you can take actions to limit your liability and demonstrate that you carried out your responsibilities properly.

The fiduciary responsibilities cover the process used to carry out the plan functions rather than simply the results. For example, if you or someone you hire makes the investment decisions for the plan, an investment does not have to be a “winner” if it was part of a prudent overall diversified investment portfolio for the plan. Because a fiduciary needs to carry out activities through a prudent process, you should document the decision-making process to demonstrate the rationale at the time a decision was made.

In addition to the steps above, there are other ways to limit potential liability. The plan can be set up to give participants control of investments in their accounts. For participants to have control, they must have sufficient information on the specifics of their investment options. If properly executed, this type of plan limits your liability for participants' investment decisions. You can also hire a service provider or providers to handle some or most of the fiduciary functions, setting up the agreement so that the person or entity then assumes liability.

Hiring a Service Provider

Even if you do hire a financial institution or retirement plan professional to manage the plan, you retain some fiduciary responsibility for the decision to select and keep that person or entity as the plan's service provider. So, you should document your selection process and monitor the services provided to determine if you need to make a change.

For a service contract or arrangement to be reasonable, service providers must give you certain information about the services they will provide to your plan and all of the compensation they will receive. This information will assist you in understanding the services, assessing the reasonableness of the compensation (direct and indirect), and determining any conflicts of interest that may impact the service provider's performance.

Some additional items to consider in selecting a plan service provider:

• Information about the firm itself: affiliations, financial condition, experience with 401(k) plans, and assets under its control
• A description of business practices: how plan assets will be invested if the firm will manage plan investments or how participant investment directions will be handled
• Information about the quality of prospective providers: the identity, experience, and qualifications of the professionals who will be handling the plan's account; any recent litigation or enforcement action that has been taken against the firm; the firm's experience or performance record; if the firm plans to work with any of its affiliates in handling the plan's account; and whether the firm has fiduciary liability insurance

If your service provider is responsible for maintaining plan records and keeping participant data confidential and plan accounts secure, use a service provider who follows strong cybersecurity practices. To prudently select and monitor such a service provider, ask for:

• Information about a firm's business practices: its information security standards, practices, policies, and annual audit results available to plan clients; how it validates its practices; and whether it has insurance policies that cover losses caused by cybersecurity and identity theft breaches (whether caused by internal or external threats)
• Information about the quality of the firm's services: its track record in the industry, including security incidents, other litigation, and legal proceedings related to its services; and for prior security breaches, what happened and how it responded

For more tips for hiring a service provider with strong cybersecurity practices, including terms and provisions recommended for inclusion in service provider contracts, visit DOL's cybersecurity website .

For information on cybersecurity best practices that service providers should follow, see DOL's website .

Once hired, you should continue to monitor your service provider.

• Evaluate any notices the service provider furnishes about possible changes to their compensation and the other information they provided when hired (or when the contract or arrangement was renewed);
• Review the service provider's performance;
• Read any reports they provide;
• Check actual fees charged;
• Ask about policies and practices (such as trading, investment turnover, and proxy voting); and
• Follow up on participant complaints.

For more information, see Understanding Retirement Plan Fees and Expenses .

Providing Information in Participant-Directed Plans

When plans allow participants to direct their investments, fiduciaries need to take steps regularly to make participants aware of their related rights and responsibilities. This includes providing plan- and investment-related information, including information about fees and expenses that participants need to make informed decisions about the management of their individual accounts.

You (or those you hire) must provide that information to participants before they can first direct their investment in the plan and annually thereafter. The investment-related information needs to be presented in a format, such as a chart, that allows for comparison of the plan's investment options. A model chart is available.

If you use information provided by a service provider that you rely on reasonably and in good faith, you will be protected from liability for the completeness and accuracy of the information.

Prohibited Transactions and Exemptions

Some transactions are prohibited under the law to prevent dealings with parties that have certain connections to the plan, self-dealing, or conflicts of interest that could harm the plan. However, there are several exceptions under the law, and additional exemptions may be granted by the U.S. Department of Labor if protections for the plan are in place in conducting the transactions.

One exemption allows fiduciary investment advisers to provide investment advice to participants who direct the investments in their accounts. The exemption applies to buying, selling, or holding an investment related to the advice, as well as to receiving related fees and other compensation by a fiduciary adviser. Please see DOL's website for more information.

Another exemption in the law permits you to offer loans to participants through your plan. If you do, the loan program must be carried out in a way that protects the plan and all other participants. Each loan request decision is treated as a plan investment and considered accordingly.

Anyone handling plan funds or other plan property generally must be covered by a fidelity bond to protect the plan against loss resulting from fraud and dishonesty by those covered by the bond.

Disclosing Plan Information to Participants

Plan disclosure documents keep participants informed about how the plan operates, alert them to changes in the plan's structure and operations, and give them a chance to make decisions and take timely action on their accounts.

The summary plan description (SPD) is a plain-language explanation of the plan and must be comprehensive enough to inform participants of their rights and responsibilities. It also informs participants about the plan features and what to expect of the plan.

Among other things, the SPD must include information about:

• When and how employees become eligible to participate in the 401(k) plan,
• The contributions to the plan,
• How long it takes to become vested,
• When employees are eligible to receive their benefits,
• How to file a claim for those benefits, and
• Participants' basic rights and responsibilities under the Employee Retirement Income Security Act (ERISA).

The SPD should include an explanation about the administrative expenses that will be paid by the plan. The plan administrator must give this document to participants when they join the plan and to beneficiaries when they first receive benefits. SPDs must also be redistributed periodically during the life of the plan.

A summary of material modifications (SMM) informs participants of changes made to the plan or to the information in the SPD. When such changes occur, all participants must automatically receive either an SMM or an updated SPD within a specified number of days after the change.

An individual benefit statement shows:

• The total plan benefits earned by a participant,
• Vested benefits,
• The value of each investment in the account,
• Information describing the ability to direct investments, and
• For plans with participant direction, an explanation of the importance of a diversified portfolio.

Plans that provide for participant-directed accounts must furnish quarterly individual benefit statements. Plans that do not provide for participant direction must furnish statements annually.

As noted above, plans that allow participants to direct the investments in their accounts must provide participants with plan and investment information, including information about fees and expenses, before they can first direct investments and annually thereafter. At least quarterly, they also must provide participants with information on the fees and expenses actually paid. The initial plan-related information may be distributed as part of the SPD provided when a participant joins the plan as long as it is provided before the participant can first direct investments. The information provided quarterly may be included with the individual benefit statement.

A summary annual report is a narrative of the plan's annual return/report, the Form 5500, filed with the Federal Government (see Reporting to Government Agencies for more information). The plan administrator must furnish it to participants annually.

A blackout period notice gives employees advance notice when a blackout period occurs, typically when plans change recordkeepers or investment options, or when plans add participants because of corporate mergers or acquisitions. During a blackout period, participants' rights to direct investments, take loans, or obtain distributions are suspended.

You can furnish these disclosures in paper or electronically. To provide them electronically, you may either post them on a plan website or email them to plan participants, after notifying participants that disclosures will be furnished electronically. There are a number of protections for participants receiving electronic disclosures, including the right to request paper copies of disclosures or to opt out of electronic delivery. You also need to take reasonable steps to protect the confidentiality of participants' personal information online. For more information, see DOL's website .

Reporting to Government Agencies

In addition to the disclosure documents that provide information to participants, plans must also report certain information to Government entities.

Form 5500 Annual Return/Report of Employee Benefit Plans

Plans must file an annual return/report with the Federal Government, in which information about the plan and its operation is disclosed to the IRS and the U.S. Department of Labor.

Depending on the number and type of participants covered, most 401(k) plans must file one of the following forms:

• Form 5500 , Annual Return/Report of Employee Benefit Plan
• Form 5500-SF , Short Form Annual Return/Report of Small Employee Benefit Plan
• Form 5500-EZ , Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan

Plans file the Form 5500 or Form 5500-SF electronically through a web-based system called EFAST2. These returns/reports are made available to the public. One-participant plans or foreign plans may file Form 5500-EZ electronically on EFAST2 or on paper with the IRS. Form 5500-EZ returns are not made available to the public.

One-participant plans (which cover only sole proprietors – whether incorporated or not — partners, and spouses) with total assets of $250,000 or less at the end of the plan year are exempt from the annual filing requirement. However, you must file a final return/report if you terminate the plan, regardless of the value of the plan's assets.

Form 1099-R

Form 1099-R , Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. is generally used to report distributions (including rollovers) from a retirement plan. It is given to both the IRS and recipients of distributions from the plan during the year.

Form 8955-SSA

Form 8955-SSA , Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits , is used to report separated participants with deferred vested benefits under the plan. It is filed with the IRS. The information is generally given to the Social Security Administration and to each deferred vested participant in an individual statement by the plan administrator.

Distributing Plan Benefits

The amount of benefits in a 401(k) plan is dependent on a participant's account balance at the time of distribution.

When participants are eligible to receive a distribution, 401(k) plans typically allow participants to:

• Take a lump sum distribution of their account,
• Roll over their account to an IRA or another employer's retirement plan, or
• Take periodic distributions.

More employers are offering annuity or other lifetime income distribution options in their defined contribution plans for employees who want to ensure that they do not outlive their retirement savings. You may want to look into what other employers are doing.

Terminating a 401(k) Plan

401(k) plans must be established with the intention of being continued indefinitely. However, business needs may require employers to terminate their plans. For example, you may want to establish another type of retirement plan instead of the 401(k) plan.

Typically, the process of terminating a 401(k) plan includes amending the plan document, distributing all assets, and filing a final Form 5500. You must also notify your employees that the plan will be discontinued. Check with your plan's financial institution or a retirement plan professional to see what else you must do to terminate your 401(k) plan.

Even with the best intentions, those operating the plan can still make mistakes. The Department of Labor and IRS have correction programs to help 401(k) plan sponsors correct plan errors, protect participants' interests, and keep the plan's tax benefits. These programs are structured to encourage early correction. Having an ongoing review program makes it easier to spot and correct mistakes in plan operations.

See the Resources section for further information.

A 401(k) Plan Checklist

• Which type of 401(k) plan best suits your business?
• Will you hire a financial institution or retirement plan professional to help with setting up and running the plan?
• Will you make contributions to the plan, and, if so, will you make nonelective and/or matching contributions? (Remember, you may design your plan so that you may change your nonelective contributions if necessary due to business conditions.)
• Have you adopted a written plan that includes the features you want to offer, such as whether participants will direct the investment of their accounts?
• Have you notified eligible employees and provided them with information to help in their decision-making?
• Have you arranged a trust for the plan assets, or will you set up the plan solely with insurance contracts?
• Have you developed a recordkeeping system?
• Do you understand your fiduciary responsibilities?
• How will you monitor the plan's service providers and investments?
• Do you understand the reporting and disclosure requirements of a 401(k) plan?

For help establishing and operating a 401(k) plan, you may want to talk to a retirement plan professional or a representative of a financial institution offering retirement plans. You should also speak to a qualified tax professional about your particular situation and take advantage of the help available in the Resources section.

To find this publication and more information on retirement plans, visit:

The U.S. Department of Labor's Employee Benefits Security Administration

• Information for small businesses
• Retirement saving information for employers and employees

Internal Revenue Service

• Guidance for maintaining your 401(k) plan
• Retirement Plans Startup Costs Tax Credit
• 401(k) Plan Checklist

In addition, the following jointly developed publications are available on the DOL and IRS websites or can be ordered electronically or by calling toll-free 866-444-3272:

• Choosing a Retirement Solution for Your Small Business , Publication 3998, provides an overview of retirement plans available to small businesses.
• Automatic Enrollment 401(k) Plans for Small Businesses , Publication 4674, explains a type of retirement plan that allows small businesses to increase plan participation.
• Adding Automatic Enrollment to Your 401(k) Plan , Publication 4721, explains how to add automatic enrollment to your existing 401(k) plan.
• Payroll Deduction IRAs for Small Businesses , Publication 4587, describes an arrangement that is an easy way for businesses to give employees an opportunity to save for retirement.
• Profit Sharing Plans for Small Businesses , Publication 4806, describes a flexible way for businesses to help employees save for retirement.
• SEP Retirement Plans for Small Businesses , Publication 4333, describes a low-cost retirement savings option for small businesses.
• SIMPLE IRA Plans for Small Businesses , Publication 4334, describes a type of retirement plan designed especially for small businesses.

For business owners with a plan

• Retirement Plan Correction Programs , Publication 4224, briefly describes the IRS and DOL voluntary correction programs.

Related materials available from DOL

For small businesses.

• Meeting Your Fiduciary Responsibilities
• Understanding Retirement Plan Fees and Expenses
• Selecting an Auditor for Your Employee Benefit Plan
• Reporting and Disclosure Guide for Employee Benefit Plans
• Tips for Selecting and Monitoring Service Providers for Your Employee Benefit Plan

In addition, DOL's Small Business Retirement Savings Advisor helps small business owners choose the most appropriate retirement plan for their businesses and provides resources on maintaining plans.

For employees

• A Look at 401(k) Plan Fees
• What You Should Know about Your Retirement Plan (also in Spanish, Arabic, Simplified Chinese, Traditional Chinese, French, Haitian Creole, Korean, Polish, Portuguese, Russian, Tagalog, and Vietnamese)
• Savings Fitness: A Guide to Your Money and Your Financial Future (also in Spanish)
• Taking the Mystery Out of Retirement Planning (also in Spanish)
• Top 10 Ways to Prepare for Retirement (also in Spanish, Arabic, Simplified Chinese, Traditional Chinese, French, Haitian Creole, Korean, Polish, Portuguese, Russian, Tagalog, and Vietnamese)
• Women and Retirement Savings (also in Spanish)

To view these publications, go to DOL's Saving Matters website . To order publications or request assistance from a benefits advisor, contact EBSA electronically or call toll free 866-444-3272.

Related materials available from the IRS

• Lots of Benefits , Publication 4118, discusses the benefits of sponsoring and participating in a retirement plan (also available in Spanish, Korean, Vietnamese, Chinese, and Russian).
• Have you had your Check-up this year? for Retirement Plans , Publication 3066, encourages employers to perform a periodic “check-up” of their retirement plans through the use of a checklist, and how to initiate any necessary corrective action.
• 401(k) Plan Checklist , Publication 4531, a tool to help you keep your plan in compliance with many of the important tax rules.
• Designated Roth Accounts under 401(k), 403(b), or governmental 457(b) plans , Publication 4530, discusses this popular feature found in many 401(k), 403(b), and governmental 457(b) plans.
• Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) , Publication 560, describes types of plans, qualification rules, setting up a qualified plan, the minimum funding requirement, contributions, employer deduction, elective deferrals, the qualified Roth contribution program, distributions, prohibited transactions, and reporting requirements.

To view these related publications, go to the IRS's website .

• Why Merrill
• Open An Account
• Why Choose Merrill
• Pricing & Fees
• BofA Preferred Rewards
• Investing & Banking Connected
• Mobile Investing
• Sustainable Investing
• Awards & Accolades

888.637.3343

To find the small business retirement plan that works for you, contact:

Learn more about an advisor's background on FINRA's BrokerCheck

• Personalized Investment Options
• Merrill Edge ® Self-Directed
• Merrill Guided Investing
• Invest with an Advisor
• Compare All
• General Investing
• Education Accounts
• Mutual Funds
• Fixed Income & Bonds
• Margin Trading
• Order Execution Quality
• Idea Builder
• Merrill Edge MarketPro ®
• Early in Your Career
• Peak Earning Years
• Nearing Retirement
• In Retirement
• View all Tools
• Tax Resources
• Plan for College
• College Cost Calculator
• 529 Plan State Tax Calculator
• Plan for Retirement
• Personal Retirement Calculator
• Retirement Account Selector Tool
• 401(k) Rollover Calculator
• Traditional IRA
• Income in Retirement
• Retirement Account Types
• Retirement Tools
• Small Business 401(k)
• Individual 401(k)
• View All Plans

• Get Started Investing
• Investing Basics
• Advanced Investing
• Market & Investing Insights
• Account Options
• Individual Investing Account
• Joint Investing Account
• Custodial Investing Account
• Traditional Inherited IRA
• Roth Inherited IRA
• 529 College Savings Plans
• Custodial UGMA/UTMA Accounts
• Business Investor Account
• lnvesting Costs & Fees
• Pricing & Fees
• Investing & Banking Connected
• Awards & Accolades
• Merrill Edge ® Self-Directed
• Investing with an Advisor
• Compare all
• Fixed Income & Bonds
• Merrill Edge MarketPro ®
• Retirement Account Selector
• 401(k) Rollover Tool
• View all tools
• New to Investing
• Tax Plannning
• Investing by Life Stages
• View all plans
• Market & Investing Insights
• Help When You Want It Find answers to common questions  at Merrill Schedule an appointment  with Merrill To find the small business retirement plan that works for you, contact: [email protected]

Compare employer and self-employed plans

Individual 401(k)  at merrill, sep ira  at merrill, simple ira  at merrill, small business 401(k)  at merrill, what plan fits my business, individual 401( k ), small business 401( k ), contributions footnote  4, investment choices, filing requirements, contribution limits, ready to get started, set up a meeting.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF) .

I'd Like to

• Create an Emergency Fund
• Create an Investment Strategy
• Open an Account  with Merrill

Discover Merrill

• Bank of America Preferred Rewards
• Online Trading
• Awards & Recognition

Representatives are available 24/7

[email protected]

Unlimited $0 Trades

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

The performance data contained herein represents past performance which does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For performance information current to the most recent month end, please contact us.

Net Asset Value (NAV) returns are based on the prior-day closing NAV value at 4 p.m. ET. NAV returns assume the reinvestment of all dividend and capital gain distributions at NAV when paid.

Market price returns are based on the prior-day closing market price, which is the average of the midpoint bid-ask prices at 4 p.m. ET. Market price returns do not represent the returns an investor would receive if shares were traded at other times.

Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. 10 year returns are provided for funds with greater than 10 years of history.

Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks. This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money. Prospectuses can be obtained by contacting us.

Expense Ratio – Gross Expense Ratio is the total annual operating expense (before waivers or reimbursements) from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus.

This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (Form CRS) (PDF) .

Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation ("BofA Corp.").

Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp.

© 2024 Bank of America Corporation. All rights reserved.

6 Types Of Business Ownership: Definitions, Pros & Cons

Updated: Jun 3, 2024, 8:59pm

Table of Contents

1. sole proprietorship: best for cost, 2. general partnership: best for new partners, 3. limited liability company (llc): best for liability structure, 4. limited liability partnership (llp): best for professional businesses, 5. c-corporation: best for outside investment opportunities, 6. s-corporation: best for multiple owners seeking board oversight, types of business ownership compared, how to choose the right type of business structure, frequently asked questions (faqs).

When starting a business, there are different types of business ownership structures that you can choose from. Each has its pros and cons, usually dealing with tax structures and liability. We take a closer look at each ownership structure to help you determine which is the best for your new business.

Here are the six most common types of business ownership:

Featured Partners

ZenBusiness

$0 + State Fees

Varies By State & Package

On ZenBusiness' Website

Northwest Registered Agent

$39 + State Fees

On Northwest Registered Agent's Website

Tailor Brands

$0 + state fee + up to $50 Amazon gift card

Varies by State & Package

On Tailor Brands' Website

$0 + State Fee

On Formations' Website

• Liability: Full liability
• Taxes: Taxed to owner
• Key Benefit: No formal filing

A sole proprietorship is an unincorporated business entity that is owned by a single person. This is a common business structure for many smaller teams to keep things simple. While a sole proprietorship doesn’t often have any business entity associated with it, it is possible to form a sole proprietorship as a limited liability company (LLC) or an S-corporation. As long as the LLC or corporation is owned by one member or shareholder with pass-through taxes, it is still considered a sole proprietorship. But for the sake of this comparison, we’ll treat the sole proprietorship as a business structure with no separate entity formed.

A sole proprietorship doesn’t limit the personal liability of the owner. This is why legal experts don’t highly recommend sole proprietorships. However, for a small business that is just getting started, it may be the best option that fits in the budget. A sole proprietor may file a DBA (“doing business as”) with the county clerk’s office to ensure they have a unique name that no one else can use. There is often a nominal fee.

• Taxes: Taxed to owners
• Key Benefit: Defines roles

A general partnership is an agreement between two or more individuals who agree to share in the profits, losses and legal liabilities of a company. In the general partnership, each partner is responsible for filing their own taxes based on the revenues passed to them through the partnership. There is no limit to their personal liability, meaning that the partners have unlimited responsibility for company debts and legal liabilities.

Similar to a sole proprietorship, the partnership doesn’t need to form a formal entity but may. A general partnership is best suited for new companies testing the waters before investing in a formal structure. They may want to see how the partners work together and if the company has the merits to be successful.

• Liability: Limited to company
• Taxes: Taxed to members
• Key Benefit: Reduces liability

A limited liability company (LLC) is a business structure that limits the personal liability of LLC members. The LLC becomes an official business entity once it is registered with the Secretary of State in the state in which the business resides and operates. By limiting the personal liability of members, the LLC ensures that only the company assets can be used to pay off debts and address other liabilities. Members can’t be held personally responsible for them.

The LLC is more complex to maintain than a sole proprietorship or general partnership, as annual filing requirements exist. However, it is less complex than a corporation. This makes it a good option for business owners wanting to limit liability without adding a lot of extra work.

LLC State Guides

• Connecticut
• Massachusetts
• Mississippi
• New Hampshire
• North Carolina
• North Dakota
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• West Virginia
• Liability: Limited to contribution
• Taxes: Taxed to partners
• Key Benefit: Reduces liability of partners

A limited liability partnership (LLP) is a partnership structure registered as a business entity that reduces each partner’s liability to what they have contributed. The risk for the business is spread among the partners who each have defined roles in the company. Because liability is limited, creditors cannot go after partners’ personal assets for company debts and liabilities.

An LLP is a popular choice among professionals who create business groups, such as lawyers, accountants, doctors and wealth managers. Partners may buy into the LLP, limiting their downside to the amount of capital put into the partnership.

• Liability: Limited to business assets
• Taxes: Taxed as corporation
• Key Benefit: Easy to add shareholders/owners

A C-corporation is a business entity that is set up with shareholders as the owners of the company. Shareholder liability is to the liabilities of the company, meaning their personal assets are not at risk. Unlike an LLC, where the revenues go directly to the members, the C-corporation is taxed as its own entity. This can result in double taxation if the entity is taxed and then the owners are taxed when distributions of profits are made to them. The C-corporation is overseen by a board of directors and must file an annual report with the state.

The C-corporation is best suited for a company seeking to bring on investors and outside financial backing. The business can easily assign shares to new owners, making this a flexible option as a business grows and expands.

• Taxes: Passed to owners
• Key Benefit: Board of directors oversight

An S-corporation is similar to a C-corporation in that it registers with the state as an entity, gives shares to owners and has a board of directors. The difference between a C-corporation and an S-corporation is that an S-corporation elects to have revenues passed down to the owners. This eliminates the possibility of double taxation as a corporation.

The S-corporation functions much as an LLC except that it has shares and a board of directors. This makes it suitable for companies with multiple founders who want the oversight of the board while being able to avoid double taxation.

When choosing a business ownership structure type, think about what you’re protecting, whether or not there will be other owners, whether you plan on getting investors or not and how you want the taxes to be paid. Most people consult with a lawyer and a tax professional before making a final decision on which entity is best.

One of the most important things you can do as an owner is to limit your personal liability for business debts and liabilities. This is what most entities start with—reducing your exposure. From there, you want to consider how the profits are distributed and thus taxed. If profits are passed through, that means that you add the profits to your personal tax return. This avoids double taxation, which can happen with a C-corporation.

However, if you plan on getting outside investment or plan on selling the company, a C-corporation is the easiest to manage. That being said, corporations have boards of directors and must have annual meetings and have more required filings than other business structures.

Ultimately, you want to choose a business type that protects you while meeting your tax and growth needs.

Bottom Line

Starting a new business can be overwhelming because of all the choices that are available for the business type. Take the time to review what you want for liability structure, tax structure and how flexible you want ownership to be. These are the key considerations and differences between the different entity types.

What are the four main types of businesses?

The four main types of businesses are sole proprietorship, partnership, LLC and corporation.

Is an LLC a good idea?

An LLC is a good idea for small business owners who want to limit liability and pass through taxes. If you plan on having ownership interests change, this structure may not be as suitable as a corporation.

Can I start a corporation alone?

It is possible to have a corporation with one shareholder. This person would be the sole owner of the business though they may have employees to help them run the company.

What is an example of a sole proprietorship?

An independent artist who sells their work to clients is an example of a sole proprietor. Many freelancers, artists, actors, writers and makers tend to function as sole proprietors.

• Best LLC Services
• Best Registered Agent Services
• Best Trademark Registration Services
• Top LegalZoom Competitors
• Best Business Loans
• Best Business Plan Software
• ZenBusiness Review
• LegalZoom LLC Review
• Northwest Registered Agent Review
• Rocket Lawyer Review
• Inc. Authority Review
• Rocket Lawyer vs. LegalZoom
• Bizee Review (Formerly Incfile)
• Swyft Filings Review
• Harbor Compliance Review
• Sole Proprietorship vs. LLC
• LLC vs. Corporation
• LLC vs. S Corp
• LLP vs. LLC
• DBA vs. LLC
• LegalZoom vs. Incfile
• LegalZoom vs. ZenBusiness
• LegalZoom vs. Rocket Lawyer
• ZenBusiness vs. Incfile
• How To Start A Business
• How to Set Up an LLC
• How to Get a Business License
• LLC Operating Agreement Template
• 501(c)(3) Application Guide
• What is a Business License?
• What is an LLC?
• What is an S Corp?
• What is a C Corp?
• What is a DBA?
• What is a Sole Proprietorship?
• What is a Registered Agent?
• How to Dissolve an LLC
• How to File a DBA
• What Are Articles Of Incorporation?

Next Up In Business

• Best Online Legal Services
• How To Write A Business Plan
• Member-Managed LLC Vs. Manager-Managed LLC
• Starting An S-Corp
• How To Start A Coffee Shop
• How Much Does It Cost To Start An LLC?

What Is SNMP? Simple Network Management Protocol Explained

What Is A Single-Member LLC? Definition, Pros And Cons

What Is Penetration Testing? Definition & Best Practices

What Is Network Access Control (NAC)?

What Is Network Segmentation?

How To Start A Business In Louisiana (2024 Guide)

Kimberlee Leonard has 22 years of experience as a freelance writer. Her work has been featured on US News and World Report, Business.com and Fit Small Business. She brings practical experience as a business owner and insurance agent to her role as a small business writer.

Cassie is a deputy editor collaborating with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of directors of two non-profit organizations seeking to revitalize her former railroad town. Prior to joining the team at Forbes Advisor, Cassie was a content operations manager and copywriting manager.

Small business owners respond to Kamala Harris's tax relief plan

TUCSON, Ariz. (KGUN) — Vice President and Democratic presidential nominee Kamala Harris unveiled a plan Wednesday to increase small business tax deductions from $5,000 to $50,000.

President and CEO of REA Media Group Raul Aguirre said, a tax break like this would have been life-changing when he started his business in the early 90's.

"It costs an average of about $40,000 to start a new business. That can seem like an impossible number to many of our entrepreneurs," Aguirre said. "I know that was true for me.”

Harris is also proposing to help existing businesses by making it easier to file taxes and do business across state lines.

“Vice President Harris's proposal will help small business owners like us to continue achieving our dreams and strengthen our businesses," said Julio Garcia, owner of Buendia Breakfast and Lunch Cafe.

On the other hand, Rob Curcio, who owns OV Pizza and Pints, said, it's not a tax break he's looking for.

"I'd rather see the tax breaks go to my customers so that they have more discretionary income to actually come in and spend money," Curcio said.

While Harris's tax deduction proposal would let new businesses wait until they've turned a profit to claim the credit, Curcio said, it could take years for a business to make a profit, and, in turn, pay taxes.

"Small businesses, sometimes they don't even turn a profit in the first three-to-five years," Curcio said. "They're barely breaking even, if anything, the first two or three years."

Curcio also wonders, what happens after businesses get a tax relief as they start up?

"Lo and behold, we have a lot of new small business that start up and they get that initial $50,000 tax break, and they're lucky enough to be able to make a profit and pay taxes. At what rate are they going to pay taxes afterwards?" Curcio asked.

But, Aguirre, said, he sees the tax break as an opportunity for future Latino business owners to grow.

“Now Latinos are moving into this entrepreneurial faith. They're more college educated, they have more technological skills. So the benefits — they're going to be huge," Aguirre said.

If elected into office, Harris's plan would still need congressional approval.

——— Maria Staubs is a reporter for KGUN 9 , she joined the KGUN 9 team in July of 2024 after graduating from Arizona State University. Share your story ideas with Maria by emailing [email protected] or by connecting on Instagram , or Twitter .

Report a typo

Sign up for the Headlines Newsletter and receive up to date information.

Now signed up to receive the headlines newsletter..

PRIMARY ELECTION RESULTS

• All Recent News
• Fintech Friday
• Regulation & Legislation
• Regulatory Compliance
• DC Plan Design
• Inside NAPA
• Practice Management
• Business Growth Strategies
• Client Services
• Sales & Marketing
• Conferences
• Investments

• Certified Plan Fiduciary Advisor (CPFA®/QPFC)
• 401(k) Specialist (N(k)S™)
• Nonqualified Plan Consultant (NQPC™)
• 401(k) Rollover Specialist ((k)RS™)
• Introduction to Retirement Plans (IRP)
• Retirement Plan Fundamentals (RPF)
• 401(k) Practice Builder
• Retirement Income for 401(k) Plans (RI(k)™)
• ESG Investing for 401(k) Advisors (ESG(k)™)
• Examination Policy
• NAPA Credential Check
• Check My CE Transcript
• NAPA 401(k) Summit
• NAPA APEX Roundtable
• NAPA D.C. Fly-In Forum
• NAPA Nonqualified Plan Consultant Conference
• NAPA/NTSA ERISA 403(b) Advisor Conference
• Upcoming Webcasts
• On-Demand Webcasts
• Events Code of Conduct
• Continuing Education

Industry Content

• NAPA Advisor Research Institute
• NAPA Net the Magazine
• Executive Interviews
• Membership Benefits
• Credentialed Membership Application
• Firm Partner Membership
• NAPA Firm Partners

Get Involved

• Advocacy Engagement
• Women in Retirement
• Diversity Initiatives
• NAPA Government Affairs Committee

Partner with NAPA

• NAPA Leadership Council

'Positive' Thinking: Why Small Businesses That Offer a 401(k) Do So

• Industry News & Trends

Publish Date:

Last week we explored the reasons why small businesses DON’T offer a retirement plan to their workers. But there are quite different—and positive—reasons for choosing to do so.

Reasons ‘Able’

According to that recent survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research, when the small business owners who offer retirement plans were asked the reasons that they do so, factors associated with attracting and retaining workers were the most prominent. Indeed, the vast majority—more than 9 in 10 of the small business owners [ii] —said that a reason they offer a plan is the positive effect on employee attitude and performance. 

According to the report, 90% said that a competitive advantage for the business in employee recruitment and retention is a reason for offering a plan. In fact, nearly a third (30%) said the positive effect of offering a plan is the MOST important reason, though nearly as many (25%) cited the competitive advantage as the most important reason.

Tax ‘Tacts’

Not that tax benefits and preferences weren’t factors; roughly two-thirds of the small business owners said that tax advantages for key executives and allowing the owner to save for retirement on a tax-deferred basis were (also) reasons for offering a plan, though only about 5% of the small business owners cited each of these as the most important reason.

The bottom line is there are any number of good, positive reasons—benefits for workers and business owners alike—for offering, and participating in, a workplace retirement plan. Unfortunately, there are also any number of reasons to put off doing so—not enough time, worries about the expense, confusion about the options, inertia, and that all-too-human inclination to put off big decisions for another day.

Then again, aren’t those the same reasons often put forth to justify not saving for retirement?

See also:  5 Reasons Why Your Small Business Should Offer a Retirement Plan | National Association of Plan Advisors (napa-net.org)

[i] Notably the tax credits included in SECURE 2.0.

[ii] While those small business owners seem committed to the offering, the survey DID find some points of confusion with regard to the obligations associated with that undertaking. Turns out the one statement the survey asked about plan design requirements that was not true had the highest percentage of business owners agreeing with it; two-thirds (63%) of these owners thought that employer contributions were always automatically vested (in fairness, those who didn’t offer a plan were even more mistaken—and that WAS cited as a reason for not offering a plan).

Please log in or create a free account to comment on this article.

Log In or Create Account

Advertisement

Recommended For You

Another employer has been sued for its pension risk transfer (PRT) choice, and while the issues align with previous litigation, the plaintiffs here are represented by a different law firm.

The results of a new survey find that most investors believe that the use artificial intelligence (AI) increases the risk of financial fraud, but the sentiment surrounding AI isn’t entirely negative.

Plan fiduciaries have pushed back on an excessive fee suit, noting that managed accounts and target-date funds are “apples and oranges”—and “an apple is not overpriced because it is more expensive than an orange.”

Watch CBS News

Kamala Harris proposes $50,000 tax break for small businesses

By Megan Cerullo

Edited By Anne Marie Lee

Updated on: September 4, 2024 / 5:43 PM EDT / CBS News

Vice President Kamala Harris, the Democratic presidential nominee, on Wednesday proposed policies she hopes will help spur small business creation across the U.S., and also announced a break with one of President Biden's policies by calling for a smaller increase than he has proposed on capital gains taxes.

For one, she wants to expand the small business tax credit tenfold — from $5,000 to $50,000 — to help startups cover the average $40,000 it costs to launch an enterprise. She's also setting a goal of receiving 25 million new small business applications in her first term, up from the record 19 million that were filed under the Biden-Harris administration. 

"As President, one of my highest priorities will be to strengthen America's small businesses," Harris said at a campaign stop at Throwback Brewery outside of Portsmouth, New Hampshire, Wednesday. "So, first we're gonna help more small businesses and innovators get off the ground."

In addition to growing the number of small businesses that are created, Harris said she's aiming to make it easier for existing companies to expand by cutting the "red tape that can make starting and growing a small business more difficult than it needs to be."

On the capital gains tax, Harris argued that "when the government encourages investment, it leads to broad-based economic growth and it creates jobs which make our economy stronger."

Harris' proposal of 28% capital gains tax rate for those making over $1 million is lower than than the 39.6% rate established in Biden's FY2025 budget proposal. It is currently 23.8%. 

With the proposals, Harris is aiming to make it easier for entrepreneurs to grow their shops by eliminating some of the financial hurdles that can make it difficult for founders to succeed. 

The proposals underscore Harris' conviction that the nation's 33 million small businesses underpin the U.S. economy, by employing nearly all private-sector workers, generating trillions of dollars annually and driving economic growth and innovation, a campaign official told CBS News. 

Harris' tax deduction proposal would also let new businesses wait until they turned a profit to claim the credit, if they so chose, to reduce their tax bill. 

The presidential candidate is also proposing streamlining the tax-filing process by developing a standard deduction for small businesses, making it easier for companies to obtain occupational licenses in order to expand, and incentivizing state and local governments to relax regulations that can hamstring small businesses' growth. 

"We will make it cheaper and easier for small businesses to file their taxes," Harris said, adding that she wants to "take away some of the bureaucracy in the process to make it easier for people to actually do something that's going to benefit our entire economy."

Other previously announced features in Harris' wide-ranging economic agenda include promises to cut taxes for most Americans, build more affordable housing, and ban "price gouging" in the food industry . 

Aaron Navarro contributed to this report.

Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.

More from CBS News

More than 90 business leaders endorse Kamala Harris for president

Harris campaign hits Trump on Taliban deal after Afghanistan criticism

GOP-led House panel says Biden administration misled public on Afghanistan exit

How Trump and Harris are preparing for their first debate of 2024

Maine small business owners tout VP Harris plan for growth

by Sam Wheeler, WGME

PORTLAND (WGME) – Some small business owners in Maine are touting Vice President Kamala Harris' plan for small businesses, which former President Donald Trump says would "destroy our small business economy."

During a virtual Harris rally Friday, they said there were 19 million new small business applications during the Biden-Harris administration, saying it was because the administration made sure money was there for it.

They also touted the vice president's new plan for up to $50,000 in tax credits for new small businesses and her goal of getting 25 million new small business applications in her first term.

• Also read: VP Harris unveils plan to help small businesses at campaign stop in New Hampshire

"She's a champion for small businesses, and I believe her vision will help distilleries like mine and small businesses across Maine flourish," Sam Pierce of Three of Strong Spirits said.

Trump responded to the Harris plan Thursday with a video, writing in all caps, "COMRADE KAMALA'S SMALL BUSINESS 'PLAN' WOULD DESTROY OUR SMALL BUSINESS ECONOMY..." but he doesn't say how.

He said Thursday in New York if re-elected, he'll work toward driving down inflation and putting major new tariffs on foreign goods.

• Newsletters
• Best Industries
• Business Plans
• Home-Based Business
• The UPS Store
• Customer Service
• Black in Business
• Your Next Move
• Female Founders
• Best Workplaces
• Company Culture
• Public Speaking
• HR/Benefits
• Productivity
• All the Hats
• Digital Transformation
• Artificial Intelligence
• Bringing Innovation to Market
• Cloud Computing
• Social Media
• Data Detectives
• Exit Interview
• Bootstrapping
• Crowdfunding
• Venture Capital
• Business Models
• Personal Finance
• Founder-Friendly Investors
• Upcoming Events
• Inc. 5000 Vision Conference
• Become a Sponsor
• Cox Business
• Verizon Business
• Branded Content
• Apply Inc. 5000 US

Inc. Premium

Harris to Propose Major Tax Deduction Increase for New Small Businesses

Contrasting donald trump's focus on cutting corporate taxes, kamala harris will propose increasing the current $5,000 deduction for new small company owners to $50,000 in a plan to keep new business launch rates high..

Democratic presidential candidate  Kamala Harris  today plans to unveil more details about her economic platform for the next four years, particularly measures to assist entrepreneurs launching small businesses. Those are expected to include dramatically increased tax deductions to help owners of new modest-sized companies, and continue fueling new startup growth. They'll also serve to contrast Republican rival Donald Trump's focus on additional corporate tax cuts, whose rate Harris says she would raise --thereby reversing reductions Trump oversaw during his term in office.

Among the proposals Harris is expected to reveal during a New Hampshire campaign speech today is the tenfold expansion of the current $5,000 tax deduction for new  small companies  to $50,000. The measure would also provide entrepreneurs more leeway in deciding when they claim the credit to offset startup costs by allowing them to declare it once they begin turning profits. It's currently applied only to expenses incurred while preparing the launch of those business. Aides to the vice president told the Washington Post  the overall initiative seeks to encourage the creation of  25,000 new businesses  during her first four years in office.  

There are several reasons for the Democrats' embracing entrepreneurs. For starters, around 62 million people in the U.S. are employed by small businesses, which make up over 90 percent of the nation's total. Meanwhile, the ranks of those modest-sized companies have continued expanding at a record pace.

According to a Treasury Department report released Tuesday, monthly new  small company applications  have averaged 430,000 so far this year. That represents a 50 percent increase over levels in 2019, which was also the last full year of Trump's presidency. Those modest-sized enterprises launched since 2019 have also generated 70 percent of the nation's new jobs over that five-year period, up from 64 percent during the last half-decade before the pandemic.

Harris' small business tax deduction plan also seeks to supercharge the 19 million new small companies created under the Biden Administration to date by setting an even higher goal of 25,000 business launches during her first term.

"Thanks to our Administration's historic investments in the success and growth of small businesses, there have been a record breaking 19 million new small business applications since President Biden and I took office--including in overlooked and underserved communities," Harris said in a statement accompanying the Treasury report. "As I've traveled the country, I've had the privilege to meet so many of the  inspiring entrepreneurs  and workers who power these businesses. I will never stop fighting to ensure they have the resources, support, and opportunity to not only survive, but thrive."

Meanwhile, by looking to support entrepreneurs with her plan, Harris is also contrasting Trump's primary focus on big companies.  During his presidency, corporate tax rates were cut from 35 percent to 21 percent--a level he has said during campaigning he may knock down to 15 percent if elected. In unveiling her proposals today, Harris is appealing to a much larger group of business owners and employees, while also seeking to fuel continued record growth of their numbers.

"The United States is in the midst of an unprecedented small business and start-up boom that nobody saw coming," John Lettieri, president of the nonpartisan Economic Innovation Group, told the  Post . "There's been precious little from any policymaker to harness this and keep it going."

Perhaps that about to change.

Harris campaign advisors told the  Wall Street Journal  the vice president will also announce proposals to encourage increased investment in  rural small businesses , and mandate that a third of federal contract spending be entrusted with modest-sized companies. The paper said the vice president will additionally pledge a "standard deduction for small firms to expedite their tax filings, lower barriers for occupational licenses, and approve incentives for state and local governments to make it easier to form start-ups."

Those proposals would dovetail with broader progressive measures Harris announced last month, including new housing subsidies, battling inflation exacerbated by price gouging, and restoring the recently expired child tax benefit. Her campaign has also backed Biden administration priorities of raising taxes on corporations and the very wealthy, while protecting households earning less than $400,000 annually from those hikes. 

Independent organizations calculated those earlier Harris policies would cost around roughly $1.7 trillion over the next decade. It's unclear how much the proposed increase of tax deductions to new small business owners would add to that. What has been established, however, is the price of Trump's tax, tariffs, and other economic positions, which are expected to add up to  $5.8 trillion  to the U.S. deficit.

That contrast appears to have been factored into a new Goldman Sachs study forecasting how the U.S. economy would fare  under a Harris presidency compared to a second Trump term. Shaping those estimates are scenarios of either eventual winner facing supportive legislatures prone to backing their policy objectives, or hostile majorities resisting them.

"We estimate that if Trump wins in a sweep or with divided government, the hit to growth from tariffs and tighter immigration policy would outweigh the positive fiscal impulse, resulting in a peak hit to  GDP growth of -0.5  (percent) in 2025," Goldman economists wrote. "If Democrats sweep, new spending and expanded middle-income tax credits would slightly more than offset lower investment due to higher corporate tax rates, resulting in a very slight boost to GDP investment due to higher corporate tax rates, resulting in a very slight boost to GDP growth on average over 2025-2026."

Additionally, the report noted monthly employment growth rates would likely be 10,000 jobs higher under a Harris presidency than if Trump were to win and face a hostile Congress refusing to pass his policies unaltered. Remarkably, the difference in Harris' net positive job creation figure increased to $30,000 a month when contrasted with the scenario of a re-elected Trump's tax and tariff proposals being passed by a friendly Republican legislative majority, generating inflationary pressures   and other negative consequences as a result.

A refreshed look at leadership from the desk of CEO and chief content officer Stephanie Mehta

Privacy Policy

• Work & Careers
• Life & Arts

Kamala Harris makes small business pitch with boost to start-up tax relief

Limited time offer, save 50% on standard digital, explore more offers..

Then $75 per month. Complete digital access to quality FT journalism. Cancel anytime during your trial.

Premium Digital

Complete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.

• Global news & analysis
• Expert opinion
• FT App on Android & iOS
• FT Edit app
• FirstFT: the day's biggest stories
• 20+ curated newsletters
• Follow topics & set alerts with myFT
• FT Videos & Podcasts
• 20 monthly gift articles to share
• Lex: FT's flagship investment column
• 15+ Premium newsletters by leading experts
• FT Digital Edition: our digitised print edition

FT Digital Edition

10% off your first year. The new FT Digital Edition: today’s FT, cover to cover on any device. This subscription does not include access to ft.com or the FT App.

Terms & Conditions apply

Explore our full range of subscriptions.

Why the ft.

See why over a million readers pay to read the Financial Times.