A Profit Sharing Plan is a plan that enables you to distribute profits in profitable years according to a formula set by the employer ahead of time. This is a great way to give employees a sense of ownership in the company. The company decides what portion of the profit is to be shared.

There are restrictions as to when and how an employee can withdraw these funds without penalties. Best suited for businesses with fluctuating profits and employee turnover. Contribution limit the lesser of 100% or compensation or $53,000.