Profit-Sharing Plan

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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.

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