Small Business Plans

How to Invest in What You Know Using a Small Business Retirement Plan

E QUITY T RUST C OMPANY

Explore Our Small Business Retirement Plans and Benefit from Greater Tax Advantages and Higher Contribution Limits
As an investor, you're always looking to make bigger and better deals more often. The more deals, the better, right? A basic self-directed traditional or Roth IRA provides many profitable deal-making advantages, including tax-deferred and tax-free profits. But that isnt enough for many investors, especially considering the relatively low contribution limits offered by the traditional and Roth IRA. Fortunately, Equity Trust offers a number of investment vehicles that provide higher contribution limits and larger tax deductions (more than $50,000) that will satisfy any investors need for bigger and better deals.

You May Qualify as a Small Business

Whether you know it or not, you're most likely eligible for government-sponsored small business retirement plans such as the SIMPLE, SEP, Solo 401(k) and Roth Solo 401(k). Being an investor often qualifies you as self-employed, a sole proprietor or even as your own small business. The advantages of a self-directed SIMPLE, SEP, Solo 401(k) and Roth Solo 401(k) plan over a traditional or Roth IRA are clear: much higher contribution limits and larger tax-deductions. In addition, you're allowed to contribute to both an individual account like a traditional or Roth IRA and a small business plantruly maximizing the investing power of self-directed retirement accounts. This report details Equity Trusts self-directed small business offerings and provides education on the potential profits you can earn. It will also help you determine what option is best for you and your investing future.

An Investment Choice that Takes You a Step Closer to Financial Freedom

It's important to know the basic facts about each plan before making an investment decision that will impact your future. The following is a brief overview of the SIMPLE, SEP, Individual(k) and Roth Individual(k):

SIMPLE
The SIMPLE is popular with investors who pay themselves $45,000 or less. It's an incentivematch plan designed for small businesses with 100 or fewer employees that have no other qualified plan. With a SIMPLE IRA, an employer contributes a percent-based salary match to its employees SIMPLE IRAs, while the employees make elective salary deferrals. Employees can contribute $11,500 annually ($14,000 if age 50+).

SEP
The SEP allows for contribution amounts of up to 25% of your salary with a maximum of $49,000. It enables individuals to make contributions toward their own retirement without getting involved in a more complex qualified plan. Any type of business or employer (you, if you're self-employed or a sole proprietor) is eligible for the SEP. It's typically designed for business owners who employ 25 or less employees.

Solo 401(k)
The Solo 401(k) is often the most attractive plan to investors, if they qualify, because it combines elements of the SEP and SIMPLE. This plan is designed for owner-only businesses and spouses. It can be established by both incorporated and unincorporated businesses, sole proprietorships, partnerships and corporations. You can contribute $16,500 annually ($22,000 if you're 50+) through salary deferral, plus a profit-sharing portion of 0-25% of your salary. The limit from both sources is $49,000 ($54,500 if you're 50+).

Roth Solo 401(k)

Would you like the same benefits of the Individual(k) but with the tax benefits of Roth-type contributions? Consider the Roth Solo 401(k). The same contribution limits apply as the Individual(k) but you can designate the salary deferral contributions you make (up to $16,500 annually if you're under 50, $22,000 if you're 50+) as Roth contributions. The portion you contribute as Roth does not qualify for a tax deduction but the profits from the these contributions grow tax free, plus all qualified distributions are tax free. The profit-sharing portion (0-25% of your salary) of the Roth Solo 401(k) is just like the standard Solo 401(k). If you're interested in learning more about one of these plans, please visit www.trustetc.com or speak to a self-directed retirement specialist at 1.888.ETC.IRAS (382-4727). The following pages detail the specific features of each plan.

A Tax-Advantaged Plan for You and Your Employees: The SIMPLE

Watch Your Account Grow Tax-Deferred
With a Savings Incentive Match Plan for Employees (SIMPLE), employees (you, if you're a real estate investor, self-employed or a sole-proprietor) can choose to make salary reduction/deferral contributions directly into a SIMPLE, rather than receiving these amounts as part of their regular salary. In addition, the employer (you, if you're selfemployed or a sole-proprietor) contributes matching funds (up to 3%) into each employee's SIMPLE.

Why Should You Enroll in this Plan?

Enroll in a SIMPLE if you want to make larger contributions and want to reduce your tax bill more significantly than you could with a traditional or Roth. Often, it's recommended that investors earning $45,000 or less a year utilize the SIMPLE. The example below illustrates how easily you can reduce your yearly taxable income. Bill Investor earns $40,000 owning his own business and decides to invest $10,000 into a SIMPLE (as an employee of his business). Bill also decides, as the employer, to contribute 3% of his employees salary (his salary) to the SIMPLE a total of $1,500. Bill has reduced his taxable income to $28,500 for the year while investing $11,500 in a self-directed IRA. Your spouse and children may also participate in the plan and open their own SIMPLE as long as they're employees of the company and meet the income requirements.

Do You Qualify?
If you run a small business, including self-employed individuals, sole proprietors, partnerships and corporations, then the SIMPLE may be right for you. Real estate investors may also qualify for the SIMPLE. Before you begin investing with this plan, there are several eligibility rules to follow. In general, an employer must have fewer than 100 employees and not be enrolled in another retirement plan. In addition to having 100 employees or less, the employees must have each received at least $5,000 of compensation for the preceding calendar year. However, if the employer doesn't have at least 100 employees the next year, then the employer can only continue the SIMPLE IRA plan for a two-year grace period following the last year it met the 100 or fewer employee rule.

Now that Youre Eligible How will You Benefit?

The SIMPLE plan was designed specifically to help small business employers (you, if you're self-employed or a sole proprietor) offer a retirement plan to their employees. The main advantage of this plan is that the account balances compound tax free until funds are withdrawn. Plus, an employee can contribute 100% of his or her annual compensation up to a maximum of $11,500 (catch-up contribution for individuals age 50 or older is $2,500). Also, an employer contributes matching funds (up to 3%) into each employees SIMPLE.

How to Avoid Withdrawal Penalties and Make Required Minimum Distributions

Youre free to make withdrawals from your account at any time. However, waiting to make a withdrawal can create a large difference in your account growth because of the tax advantages. Its possible to make a withdrawal from a SIMPLE account penalty free only when an individual reaches age 59 . Individuals receive a 10% penalty if withdrawals are made before 59 or a 25% penalty if the account is less than two years old. In addition to receiving tax-free withdrawals when 59 , its even possible to roll over your earnings tax free from one SIMPLE IRA to another. With the SIMPLE IRA you must make required minimum distributions (RMDs) when you turn 70 . Distributions are included in the individuals income when withdrawn from the SIMPLE IRA and taxed as ordinary income.

A Tax-Advantaged Plan for Small Business Owners: The SEP

Contribute Up to $49,000 a Year to Help Secure Your Future
Similar to the SIMPLE IRA, the Simplified Employee Pension (SEP) allows individuals to make contributions toward their own retirement without getting involved in a more complex qualified plan such as a 401(k). As a real estate investor, self-employed individual, sole proprietor or small business owner, the SEP enables you to contribute the most toward your own and your employees retirement, and therefore, allows you to receive the largest tax deductions. Individuals who have a SEP can also have a traditional or Roth IRA but may not be able to use all contributions as a deduction.

Why Should You Enroll in this Plan?

If you want to contribute the highest amount possible to your retirement account and qualify for the highest taxdeductions yearly, then a SEP might be your best option.

Do You Qualify?
Any type of business or employer (you, if you're self-employed or a sole proprietor) is eligible for the SEP. It's typically designed for business owners who employ 25 or fewer employees. The following is a summary of the eligibility rules for businesses, employees and spouses: Business Eligibility - Any employer, whether a corporation, partnership or self-employed individual, may establish the plan, even if there's only one employee. Employee Eligibility - Employees must be at least 21 years of age, have worked for the business during any three of the past five years and earned the annual minimum required compensation of $550 in 2011. Spousal Eligibility - Your spouse and children may also participate in the plan and open their own SEP IRAs - as long as they're employees of the company and meet the income requirements.

Now that You're Eligible How will You Benefit?

Employers may contribute up to 25% of an employees compensation or $49,000. The maximum compensation considered is $245,000 for 2011. The employer is allowed to make contributions annually but is not required to contribute each year. The deadline for establishing and contributing to the SEP plan is the tax-filing deadline plus extensions. Each contribution is tax deferred and tax deductible. With tax-deferred contributions, the taxes are not paid prior to the funds going into the account. Instead, the distributions are taxable at your regular income tax rate upon retirement.

How to Avoid Withdrawal Penalties and Make Required Minimum Distributions

The longer you wait to withdraw, the more money youll amass. Just as the SIMPLE IRA follows the traditional IRA rules, so does the SEP. A SEP owner must be 59 to make a withdrawal without a 10% penalty. With the SEP IRA you must make required minimum distributions (RMDs) when you turn 70 . Distributions are included in the individuals income when withdrawn from the SIMPLE IRA and taxed as ordinary income.

Solo 401(k) and Roth Solo 401(k) Plans - Another Opportunity for Large Tax Deductions and Higher Contributions.
Want the best features of both the SIMPLE and SEP? The Solo 401(k) may be the plan for you. The Solo 401(k) plan is only appropriate for a sole proprietor such as a real estate investor or a business (partnership or a corporation) in which only the owner(s) and the spouse(s) will be covered by the plan. The Solo 401(k) comes from the 401(k) plan. The only difference is that the Solo 401(k) was designed for owner-only businesses and spouses, while the 401(k) plan is sponsored by companies with multiple employees. The Solo 401(k) plan must be the only plan maintained by the business and the business cant be considered part of a controlled group under tax law.

Why Should You Enroll in this Plan?

The Solo 401(k) possesses high contribution amounts and large tax deductions. Two components comprise the maximum Solo 401(k) plan contribution: an employee salary-deferral contribution and an employer profit-sharing contribution. The profit-sharing contribution can range annually from 0% to 25% of compensation. An employee salary deferral can range from $0 to the annual maximum deferral limit, plus catch-up contributions, if eligible.

Do You Qualify?
This plan is ideal for both incorporated and unincorporated businesses, sole proprietorships, partnerships and corporations. The only requirement to make contributions to this plan is that an individual receives a salary or wage. The business entity must have no additional employees other than the spouse of the proprietor, or in the case of a partnership, the only employees are self-employed partners and their spouses. A Solo 401(k) plan must be the only arrangement maintained by the business which is not included as part of a controlled group under federal tax law. The deadline for establishing a Solo 401(k) plan is the last day of your businesss tax year (December 31, for a calendar tax year). However, if a business is incorporated, individuals may want to establish a Solo 401(k) plan early in the tax year to make employee salary deferrals based on the Form W-2 income throughout the year. This is necessary because you may not defer on compensation that s paid to you from your corporation before the adoption of the Solo 401(k) plan.

Now that You're Eligible How will You Benefit?

For 2011, each owner working in the business is able to contribute up to lesser of 100% of compensation or $16,500. In addition, the separate profit-sharing contribution, if any, that can be made to a Solo 401(k) arrangement is limited to 25% of the employees compensation up to the annual compensation cap (if the business is a corporation) or 20% of the employees self-employment income (if a sole proprietorship or partnership). The annual compensation cap in 2011 is $245,000. There's a total contribution limit applicable to both sources of $49,000 in 2011 and then subject to annual cost-of-living adjustments for later years. An employee 50 years of age or older may also make an additional catch-up contribution amount of $5,500 for 2011. If the employee is 50 years of age or older, the total contribution limit is $54,500 for 2011. Also, remember that spouses are eligible to open their own Individual(k) provided they have separate income and are covered in the plan.

How to Avoid Withdrawal Penalties and Make Required Minimum Distributions

The distribution rules are very similar to the rules for the SEP and SIMPLE. To make a distribution without penalty, an individual must reach the age requirement of 59 . However, withdrawals are permitted before 59 but will be subject to a 10% penalty.

Roth Solo 401(k): Contribute Up To $22,000 in a Roth Account With No Income Limits!
In 2006, Congress merged two of the most popular types of retirement savings plans, the Roth IRA and the Solo 401(k) into a Roth Solo 401(k). The Roth Solo 401(k) has the same benefits of the standard Solo 401(k) but has the bonus of Roth-type contributions. The Roth Solo 401(k) allows participants to put some of their wages into a Solo 401(k) plan (up to $16,500 or $22,000 in catch up through salary deferral) as Roth contributions that, upon distribution, will result in tax treatment similar to the tax-free distributions from Roth IRAs. The Roth Solo 401(k) is available to anyone with a Solo 401(k) and is a benefit to higher-paid employees and self-employed individuals (e.g., real estate investors) who may have been excluded from having a Roth IRA because of income limitations.

Why Should You Enroll in this Plan?

If you want Roth tax advantages (tax-free distributions) with a substantial contribution limit ($16,500), then the Roth Solo 401(k) may be for you. Also, if youre interested in a Roth IRA but dont qualify because of income limits, then the Roth Solo 401(k) is an option to consider. The following pages have a chart comparing the SEP, SIMPLE and Individual(k), plus a chart comparing the Solo 401(k) and Roth Solo 401(k).

Summary of SEP, SIMPLE, and Solo 401(k) Plans

SEP SIMPLE Solo 401(k)
The Solo 401(k) was created in 2002 to enable sole proprietors to set up and contribute to a plan offering the same benefits as the conventional 401(k). Its only appropriate for a sole proprietor or a business (either a partnership or corporation) in which only the owner(s) and spouse(s) will be covered by the plan. Two components comprise the maximum Solo 401(k) contribution: 1) An employee salary-deferral contribution. 2) An employer profit-sharing contribution.

Description

Specifically designed for selfemployed people and small business owners who typically employ fewer than 25 employees.

Designed for small businesses with 100 or fewer employees. The plan is funded by employer contributions and can also be funded by elective employee salary deferral.

Employer Contributions

Required uniform % of each employees pay (0-25%).

Employer is required to make either an annual matching contribution between 1% and 3% or an annual nonelective contribution of 2% of compensation. Plan must cover all employees who earn at least $5,000 in the current year and have received at least $5,000 during any two preceding years.

Minimum Coverage Requirements Employee Contributions Maximum Total Annual Contributions Maximum Deductions

Plan must cover all employees who earn at least $550, are at least 21 years of age and have worked for employer in three of the last five years.

Plan can only cover soleproprietor and spouse.

Not Permitted

Up to $11,500 ($14,000 If 50+)

$16,500 ($22,000 if 50+)

25%, up to a maximum of $49,000 for 2011.

Maximum employee contribution of $11,500 in 2011 (If age 50+, $14,000.) Employer matches up to 3% of salary.

$16,500 ($22,000 if 50+) and 0 25% of salary, up to a maximum total of $49,000 for 2011 ($54,500 if 50+).

25% of participants total compensation, excluding SEP contributions.

Same as maximum contribution.

Same as maximum contribution.

Withdrawals / Distributions

Permitted subject to tax and, if under 59 1/2, potential 10% penalty.

Permitted, however, if under age 59 1/2, potential 10% penalty. (25% penalty if account is less than two years old.)

Permitted subject to tax and, if under 59 1/2, potential 10% penalty.

Deadline for Establishment of Plan

Any time up to the due date of employers tax return (including extensions)

Any time between 1/1 and 10/1 of the calendar year. For a new employer beginning after 10/1, as soon as administratively feasible. Businesses established during the year have until 12/31.

The deadline for establishing an Individual(k) and to make an employee salary-deferral election is the last day of your business tax year. The deadline for funding the profit-sharing portion is your business tax return due date, including extensions

Comparison of Roth Solo 401(k) and Solo 401(k)

Roth Solo 401(k) Solo 401(k)

Description

Created in 2006 to enable sole proprietors to set up and contribute to a plan offering the same benefits as a conventional Solo 401(k), BUT with the added bonus of growing the account tax free for life like the Roth.

The Solo 401(k) was created in 2002 to enable sole proprietors to set up and contribute to a plan offering the same benefits as the conventional 401(k). Its only appropriate for a sole proprietor or a business (either a partnership or corporation) in which only the owner(s) and spouse(s) will be covered by the plan.

Contribution

Two components comprise the maximum Roth Solo 401(k) contribution: 1) An employee salary-deferral contribution. 2) An employer profitsharing contribution.

Two components comprise the maximum Solo 401(k) contribution: 1) An employee salary-deferral contribution. 2) An employer profit-sharing contribution.

Contribution limits

The employee under 50 years old is able to contribute up to $16,500 for 2011 through salary deferral, although this may not exceed 100% of pay. The employer profit-sharing match is 0-25%, up to $32,500.

The employee under 50 years old is able to contribute up to $16,500 for 2011 through salary deferral, although this may not exceed 100% of pay. The employer profit-sharing match is 0-25%, up to $32,500.

Deadline for Establishment

The deadline for establishing a Roth Solo 401(k) and to make an employee salarydeferral election is the last day of your business tax year. The deadline for funding the profit-sharing portion is your business tax return due date, including extensions.

The deadline for establishing a Solo 401(k) and to make an employee salary-deferral election is the last day of your business tax year. The deadline for funding the profitsharing portion is your business tax return due date, including extensions.

Take Control of Your Future with Equity Trust Companys Exceptional Services
The SIMPLE, SEP, Solo 401(k) and Roth Solo 401(k) offer many advantages so you can build for your future. Even if you already have a traditional IRA or Roth IRA, you can still invest in other plans for your retirement. Its time to get started with Equity Trust Company so you can take advantage of higher contribution limits and exceptional tax advantages.

Equity Trust Company: Providing Education, Innovation and Commitment

The mission of Equity Trust Company is to help investors make tax-free profits through education, innovation and a commitment to understanding their individual needs.

Equity Trust is Your Best Choice

More than 35 years of experience in educating clients about self-directed retirement accounts Management of more than $10 billion in IRA assets Knowledgeable self-directed IRA specialists ready to serve clients Personalized account management teams for every client, including a personal 800-number to ensure personalized attention for every call Low, all-inclusive fee schedule clients dont pay fees on every transaction Online account management 24 hours a day, seven days a week with eVANTAGE, the industrys first online account-management tool pay bills online, fill out forms, download information into Quicken or money financial software programs, and check account status anytime, from anywhere Quick and accurate investment processing (99.2% of transactions reviewed in 24 hours) with incredibly fast turnaround times Online trading through our affiliate, MidOhio Securities, member NASD/SIPC Highly regulated clients can trust Equity Trust with their investments 92% of Equity Trust clients are likely to refer friends and colleagues to Equity Trust (based on client survey)

If you're interested in enrolling in the SIMPLE, SEP, Solo 401(k) or Roth Solo 401(k), or for more information about these plans, please contact a self-directed retirement specialist at 1-888-ETC-IRAS.

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Is a Self-Directed Retirement Account Right for You?

At Equity Trust Company, we want you to be one of our satisfied clients. But we understand that self-directed retirement accounts arent for everyone. Theyre for those who want to create wealth using their knowledge of investments primarily outside of stocks, bonds and CDs.

Advantages
Enhanced portfolio diversification and, often, low correlation to market volatility Greater sense of control over your investment options and retirement savings Exceptional tax advantages including tax-deferred savings, tax-free growth and large tax deductions The ability to harness the true power of compounding interest since investments are made in a taxsheltered environment and earnings grow tax free Many plans provide the ability to pass assets to beneficiaries while reducing taxes Most plans have asset-protection features making them judgment proof in all 50 states

Considerations
You actively choose and manage the investments, and are solely responsible for results. As a passive custodian, Equity Trust reviews all documents for administrative feasibility but doesnt offer advice on specific investments. You must be aware of all rules, potential tax considerations and responsibilities as a self-directed accountholder. Its advised that you consult tax and financial professionals before making any investment. Because of increased administrative costs associated with the custody of alternative investments in self-directed accounts, some fees can be higher compared to accounts containing only traditional investments.

Equity Trust Company 225 Burns Road, Elyria, OH 44035 www.trustetc.com

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