Profit-Sharing Plan

AAA

DEFINITION of 'Profit-Sharing Plan'

A plan that gives employees a share in the profits of the company. Each employee receives a percentage of those profits based on the company's earnings.

Also known as "deferred profit-sharing plan" or "DPSP."

INVESTOPEDIA EXPLAINS 'Profit-Sharing Plan'

This is a great way to give employees a sense of ownership in the company. The company decides what portion of the profit will be shared. And there are typically restrictions as to when and how you can withdraw these funds without penalties.

RELATED TERMS
  1. Cash Or Deferred Arrangement - ...

    The method of funding any type of qualified profit-sharing or ...
  2. Qualified Retirement Plan

    A plan that meets requirements of the Internal Revenue Code and ...
  3. Option

    A financial derivative that represents a contract sold by one ...
  4. Annual Addition

    The total dollar amount contributed in a given year to a participant's ...
  5. Collective Investment Fund

    A fund that is operated by a trust company or a bank and handles ...
  6. Value Of Risk (VOR)

    The financial benefit that a risk-taking activity will bring ...
RELATED FAQS
  1. What's the average salary of a financial advisor?

    A financial advisor is a professional who is engaged in the business of advising clients about financial matters. "Financial ... Read Full Answer >>
  2. What types of plans allow catch-up contributions?

    Catch-up contributions can only be made to plans with salary deferral features. If you want to make catch-up contributions, ... Read Full Answer >>
  3. My company has three partners but plans to hire more this year. Would we be better ...

    It depends. The SBO-401(k) plan is suitable if the plan covers only the business owners - in this case, the partners in the ... Read Full Answer >>
  4. What is the difference between a Keogh and an IRA?

    The Keogh plan, or HR10, is an employer-funded, tax-deferred retirement plan designed for unincorporated businesses or self-employed ... Read Full Answer >>
  5. I have several jobs. Can I contribute the maximum to multiple employer retirement ...

    It depends. A question such as this requires detailed information in order to provide a helpful response. Here is a general ... Read Full Answer >>
  6. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
Related Articles
  1. Retirement

    Job Hunting: Higher Pay Vs. Better Benefits

    Focusing on salary may be a mistake. Find out which benefits have the highest long-run payoff.
  2. Retirement

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.
  3. Entrepreneurship

    Is An ESOP Right For Your Business?

    Discover how to transfer your company's net worth to the next generation of entrepreneurs.
  4. Options & Futures

    A Guide To CEO Compensation

    Make sure you assess whether a CEO has a stake in doing a good job for you, the shareholder.
  5. Entrepreneurship

    401(k) Plans For The Small Business Owner

    If you own a business, this may be the plan for you! Find out about its benefits and eligibility requirements.
  6. Taxes

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  7. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  8. Investing Basics

    What is a Minority Interest?

    A minority interest is an ownership or equity interest of less than 50% of an enterprise.
  9. Professionals

    Understanding Operations Management

    Operations management is concerned with converting materials and labor into goods and services as efficiently as possible to maximize profits.
  10. Personal Finance

    Protect Your Teen When They Work Over The Summer

    If your child is working a summer job, here are some rules you should know about what he or she is allowed to do.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center