What’s the best retirement plan for a small business that wants to grow, protect cash flow, and keep great people? The short answer: the best plan is the one aligned with your goals, ownership structure, and timeline—not the one your payroll provider auto-offers. In this guide, we compare small business retirement options like SEP IRA, SIMPLE IRA, Solo 401(k), and a full small business 401(k) plan so you can choose confidently. Our perspective is advisory-first: Any CPA firm can record history. Our firm will help you build a future.
Start with three filters: headcount, variability of profits, and hiring plans. If you’re solo or have only a spouse on payroll, a Solo 401(k) often allows higher contributions and flexible design. If you have 1–9 employees and want simplicity, a SIMPLE IRA can be low-cost and easy to administer. If profits are lumpy and you want employer-only funding without employee deferrals, a SEP IRA is straightforward. If you’re serious about recruiting, retention, and maximizing retirement savings for owners, a small business 401(k) plan (traditional or safe harbor, possibly with profit sharing or cash balance pairing) gives you the most design levers.
An accountant looks backward to file and reconcile. An advisor looks forward to designing your plan around growth, taxes, and talent strategy. The advisor approach anticipates questions before they come up, uses financial data to prepare a business plan, and removes pain by presenting solutions—not just compliance tasks. That’s our operating system at B.A.A.P.
Think of these as three different tools:
Three ways: current-year deductions, tax-deferred growth, and payroll tax optimization. Employer contributions are typically deductible to the business. Employee deferrals lower taxable wages for participants. Plan design may allow profit sharing or safe harbor contributions that amplify deductions while supporting retention. The impact is magnified when we coordinate the plan with entity choice (S corp vs. LLC taxed as S corp), reasonable comp strategy, and your personal tax bracket.
For many self-employed owners, a Solo 401(k) can allow higher total contributions at lower profit levels because it includes both employee deferrals and employer contributions. It also supports Roth deferrals and, in some designs, after-tax contributions for advanced strategies. A SEP IRA can still win on simplicity when you want employer-only funding and don’t need deferrals. Choosing a business retirement plan here depends on admin comfort, whether you plan to hire, and your desired savings rate.
Yes. Employer-sponsored retirement plans are a credibility signal. A safe harbor 401(k) creates a predictable employer commitment while allowing owners to maximize their own deferrals. Add features like immediate eligibility for seasoned hires, vesting schedules for retention, and automatic enrollment to boost participation. Integrate the benefit into onboarding and your careers page so candidates actually notice it.
“Harbor PT,” an illustrative three-therapist practice doing $1.2M in annual revenue, came to B.A.A.P. after running a SIMPLE IRA for two years. The owner wanted to increase personal savings, compete for senior clinicians, and manage payroll costs. We mapped a three-year growth plan and recommended moving to a safe harbor 401(k) with a 3% non-elective contribution plus a targeted profit-sharing formula. Result: the owner and spouse each maximized deferrals; key clinicians received competitive employer contributions tied to performance tiers; and the plan stayed compliant through safe harbor rules. In year two, as profits rose, we layered in a modest cash balance plan to accelerate retirement savings for owners without overspending on rank-and-file benefits. Harbor PT improved retention, saved on taxes, and built a clear path to partner-track incentives—exactly what an advisor designs for.
Use AI to draft questions for providers, summarize plan documents, and estimate contribution scenarios. Then have an advisor validate assumptions, run compliance tests, and connect decisions to your tax strategy. AI is a fast flashlight; an advisor is the map and the guide.
Bottom line: your business is your most important investment. A retirement plan is not just a benefit—it’s a strategic lever for growth, taxes, and talent. If you want to move beyond “set it and forget it,” partner with an advisor who will design, measure, and iterate as you scale.
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A SIMPLE IRA is often the fastest and least expensive to launch if you have employees and want basic deferrals and a required match with minimal admin.
Yes. Many businesses start with SIMPLE for simplicity and move to a small business 401(k) when hiring accelerates or owners want higher contributions and more design flexibility.
For S corps, W-2 wages influence deferral room and employer contributions. Align reasonable compensation with your retirement goals for optimal deductions.
Generally yes. A 401(k) requires plan documents, testing, and filings. A good TPA plus a low-cost recordkeeper keeps the plan compliant and efficient.
Consider a SEP IRA or a 401(k) with profit sharing funded after year-end when you see actual profits. Flexibility matters when cash flow swings.
