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The profit sharing plan is based on percentages; participating employees are granted a certain percentage of the company’s year-end profits.Profits are defined as revenues after all direct project costs (production, shipping, etc.) and indirect operational costs (salaries, rent, etc.) have been factored.

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For example, let’s take ABC Lead Generation Software, which sells a web-based software as a service (Saa S) platform.However, since companies must keep strict records and have a strict fiduciary responsibility for the plan, we recommend using a third party administrator to make sure you stay in compliance, especially since you may need to change your plan at some point.All documentation of a profit sharing plan must be airtight, so a third party truly is the best option.However, your company culture and employees need to have matured into a team that can work together at this level, which includes impeccable communication, project management, and performance skills towards goals.When done correctly and with the right team, the following benefits can happen in profit sharing: Let’s now look at an example of what a small business is currently doing for their profit sharing plan, and their insights.

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