Profit-Sharing Plan


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."

BREAKING DOWN '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.

  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. Employee Stock Option - ESO

    A stock option granted to specified employees of a company. ESOs ...
Related Articles
  1. Professionals

    Top 10 Airlines to Work For in 2015

    Find out why Southwest Airlines and JetBlue lead the list of the top airlines to work for in 2015.
  2. 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.
  3. 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.
  4. Entrepreneurship

    Is An ESOP Right For Your Business?

    Discover how to transfer your company's net worth to the next generation of entrepreneurs.
  5. 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.
  6. 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.
  7. Taxes

    Learn about eligibility requirements, contributions and distribution rules for these retirement plans.
  8. Professionals

    Prevent Employees From Hacking You Computer System

    Cyber security attacks from a current or ex-employee can cause a lot of pain. Here is how to avoid such attacks.
  9. Entrepreneurship

    Hire Your Kids at Your Small Business – Here's Why

    And how to make sure you do it the right way, following IRS guidelines.
  10. Economics

    What Do Central Counterparty Clearing Houses Do?

    A central counterparty clearing house facilitates trading in European derivatives and equities markets.
  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. 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 >>
  5. 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 >>
  6. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!