Profit Sharing Programs

Put Your Profits to Work—Tax Smart.

Most business owners are familiar with the idea of profit sharing—allocating a portion of annual profits to employees, typically through a retirement plan. But when structured with precision and integrated into a broader Tax Efficient Layering (TEL) strategy, profit sharing becomes far more than a year-end bonus.

At its core, profit sharing allows a business to contribute up to 25% of eligible compensation (capped by IRS limits) to employees—including owners. These contributions are tax-deductible to the business and tax-deferred for the recipient.

But here’s where it gets powerful:
When paired with tools like 412(e)(3) plans, ICHRAs, and smart entity structuring, profit sharing turns into a layered tax shield—one that reduces taxable income today while simultaneously securing tomorrow.

Flexibility That Works as Hard as You Do

Use Profit Sharing to Deduct Strategically—Without Locking Yourself In

One of the most overlooked advantages of a Profit Sharing Plan isn’t just the tax deduction—it’s the freedom that comes with it.

Unlike traditional retirement plans with mandatory annual contributions (like pensions), Profit Sharing Plans are discretionary. That means you, the business owner, are in the driver’s seat. Each year, you can decide:

  • How much to contribute (up to 25% of eligible compensation)

  • When to contribute (within the tax filing deadline, including extensions)

  • Who to include (based on vesting schedules and eligibility rules)

This flexibility is a powerful tool—especially in volatile markets, seasonal businesses, or industries where revenue ebbs and flows.

Here's how it helps

  • Tax Strategy on Your Timeline:
    Had a strong year? Maximize your contribution and reduce taxable income. Had a lean year? Contribute less—or not at all. No penalties. No obligations. Just smart, strategic control.

  • Align With Your Cash Flow:
    You don’t need to have the cash on hand at the end of the year. As long as you make the contribution by your tax filing deadline (with extensions), it still counts toward that year’s deduction.

  • Reward Staff Without Creating Entitlements:
    You can reward performance and loyalty without creating the long-term burden of fixed benefit promises. This makes it easier to grow responsibly while still attracting and retaining talent.

  • Layer It for Maximum Efficiency:
    When integrated with other strategies like a 412(e)(3) plan or ICHRAs, your profit sharing contributions become part of a bigger picture—a tax-sheltering framework that grows with your business.

Profit Sharing gives you options. Deduct when it makes sense. Skip it when it doesn’t. Reward yourself. Reward your people. And when you layer it correctly, it becomes a cornerstone of a larger, legally compliant, IRS-approved tax plan that keeps more money in your corner.

Your People Win Too

Profit Sharing Isn’t Just for Owners—It’s a Culture Builder

While the owner often receives the lion’s share of the contribution (especially in tightly held companies), your employees still benefit:

  • They get pre-tax retirement contributions without reducing their take-home pay.

  • They build long-term savings at no cost to them.

  • They feel invested in your business’s success—because you’ve shown them they matter.

And with custom vesting schedules, you can align these benefits with retention goals. Employees earn more the longer they stay, which helps reduce turnover and increase team stability.

Profit Sharing gives you options. Deduct when it makes sense. Skip it when it doesn’t. Reward yourself. Reward your people. And when you layer it correctly, it becomes a cornerstone of a larger, legally compliant, IRS-approved tax plan that keeps more money in your corner.

Frequently Asked Questions

  • No. That’s one of the biggest advantages of a profit sharing plan. You decide if, when, and how much to contribute each year, based on your profits, cash flow, and tax strategy.

  • You can contribute—and deduct—up to 25% of eligible employee compensation, subject to IRS limits (capped annually). Contributions for owners are also included in this limit and can significantly reduce your business’s taxable income.

  • Yes—with limits. You can design your plan with eligibility rules, vesting schedules, and even age-weighted or cross-tested allocations to favor owners or key employees. It must follow nondiscrimination rules, but there’s flexibility in the design.

  • Perfectly. It layers seamlessly with defined benefit plans, ICHRAs, and other TEL tools. A combined approach often allows for larger deductions, greater retirement accumulation, and more control over where your money goes.

  • No problem. You can contribute less—or nothing at all. There’s no requirement to fund the plan in a given year, giving you full flexibility to adjust based on the economy or your business's needs.

The Tools Behind the Layers

Each TEL strategy has its own role. When layered, they multiply value.

Click Below to Examine each one.

Ready to Layer Up?

You’ve worked too hard to leave your financial future to chance. If you're ready to use the tools the ultra-wealthy have used for decades — and apply them to your business or household — let's talk.