Finally, SEPs are much simpler to establish and administer than Keogh profit-sharing and pension plans. No annual government reports are required, and ongoing administrative expenses are negligible. SEPs are just as easy as deductible IRAs, but they allow much larger contributions. To get a deduction for the current tax year, the plan must be established before year's end. Once that's done, actual contributions can be deferred until the extended due date for that year's return.
Lower percentages are acceptable, also.
A plan document must be drafted in Year One, and the IRS requires an annual report. Annual actuarial fees and the required IRS report can be expensive. Also, you're locked into making the actuarially determined contribution each year. Roth IRAs Contributions are nondeductible, but earnings build up tax-free. If your business has employees, a SEP must cover them as well.