Before 1963, sole proprietors and partnerships were allowed to have qualified pension and profit-sharing plans for their employees, but the owners of these businesses could not get the tax benefits of the plans because they were considered owners, not employees. The only way to get the maximum retirement benefits for the owner was to incorporate.
The Self-Employed Individuals Tax Retirement Act of 1962 (also called HR-10 or the Keogh Act), and its subsequent amendments, made it possible for owner-employees of unincorporated businesses and other self-employed persons to be covered under qualified retirement plans. Over the years, this tax-favored treatment for retirement plans was extended to individuals not covered by other private qualified retirement plans. Available options include Individual Retirement Accounts (IRA) and Simplified Employee Pension (SEP) plans.
As a self-employed business owner, your major pension options are: