Terms Glossary

401(k) Plan

A 401(k) plan allows employees to defer a portion of their W-2 wages into their retirement plan reducing their taxable income for the year. The maximum amount a person can contribute to his or her plan is set each year by the IRS. For 2014, an individual can contribute up to $17,500 to their employer’s 401(k) plan. Additionally, individuals age 50 or older, can contribute an additional catch-up contribution of $5,500.

Board of Directors

The board of directors provide active leadership regarding important issues facing the corporation. In particular, the board is expected to provide leadership in:

  • defining the corporation’s mission and strategy designed to achieve that mission;
  • appointing and planning for succession of the president;
  • ensuring the corporation’s compliance with the law.

C Corporation

A C corporation is a legal structure that businesses can choose to organize to limit their owners’ legal and financial liabilities. A C corporation is legally independent and unrelated to its owner’s personal income tax.

Cliff Vesting

Cliff vesting plans transfer 100% ownership of employer’s contributions to the employee in one lump sum after a specified period of service. Employees have no right to any of their matching contributions if they leave before that period expires.

Corporate Officers

Every corporation is required to elect corporate officers. The corporation must elect a president, secretary and treasurer. A single individual can hold all corporate officer positions.

Eligibility Requirements

They are the minimum age and service requirements that must be satisfied by an employee to participate in a DreamSparkTM plan.

Employer Identification Number (EIN)

An EIN acts as a “Social Security Number” for your business. This identification number is obtained by Pango FinancialTM from the IRS when your new C corporation is established. This identification number will be used when establishing your bank account, filing tax forms or any informational filing with the federal government on behalf of your new business.

Expedited Services

This is available in most states at the time of incorporation for an additional fee to allow your articles of incorporation to be issued more quickly. Pango Financial pays this fee except in the state of California on the client’s behalf at no additional cost when you start a DreamSpark plan.

Graded Vesting

Graded vesting allows employees gradually increasing ownership of employer contributions as their length of service increases until they achieve 100% ownership. Federal law sets a six-year maximum on graded vesting schedules in retirement plans.

Immediate Vesting

Employees with this type of vesting plan gain 100% ownership of their employer’s contributions as soon as it is transferred to their personal account.

Non-Publicly Traded Employer Stock

Non-Publicly traded employer stock is stock that is not available on any publicly traded market. Any investment in non-publicly traded employer stock represents a portion of ownership in the business. The stock must be issued based on the current value of the business as determined by a third party valuation.

Profit Sharing Plan

A profit sharing plan is an employer sponsored defined contribution plan. Only the employer may make contributions on behalf of any eligible employee.

Registered Agent

  • A registered agent will help to maintain your privacy and separation from the public along with any other corporate decision makers.
  • A registered agent will also accept legal and official documents outside of the business.  This could include, but is not limited to, documents such as franchise tax notices, annual reports and official legal notices such as a court summons.

DreamSpark Plan

The DreamSparkTM plan gives you the ability to set up a corporation and subsequently a defined contribution plan which gives the participants the ability to utilize retirement savings in the form of a rollover to invest in a start-up, acquire a franchise or recapitalize an existing business. Pango FinancialTM will establish the corporation, customize the retirement plan and provide ongoing administration services. The plan can be designed as a traditional Profit Sharing Plan or 401(k) with the ability to invest in your business along with traditional retirement plan benefits.

Vesting

The period of service required to accrue ownership in employer contributions in order to withdraw them at the time of retirement or separation from service.