Can an Annuity Be Owned by a Business?

Annuities are one way to provide retirement income, defer taxes and provide reliable payments for the rest of the owner's life. An annuity combines elements of an investment and an insurance policy, making it a valuable addition to a retirement portfolio. A business may own an annuity, but it may not provide the same benefits that it does to an individual owner.

Annuity Types

The effect of a business owning an annuity depends on the type of annuity in question. Single premium and multiple premium annuities function the same way for businesses as they do for individual owners, relying on one or multiple payments, respectively, to in turn provide a fixed series of payments. However, businesses can't defer taxes on the interest that these annuities earn, which eliminate one of the key benefits annuities offer.

Business Annuities

Business annuities are a special class of annuities that are specifically designed for small business owners. A business annuity can only be used to fund individual retirement accounts for the company's employees. The money from the annuity is tax-deferred for the owner and adds to the IRA's value for the employee. Small business owners can also set up business annuities that rely on pre-tax paycheck withholdings to fund employee IRAs. This makes it a cost-effective way for some small businesses to offer retirement plans, though employees don't benefit from the employer's business annuity directly when they retire.


Trusts can own annuities under certain conditions. For example, when a trust serves as the agent for a deceased person's estate, it can own an annuity that the deceased person originally purchased. When these conditions are met, the trust has access to all of the advantages, including deferred tax on accumulated interest, that an individual annuity owner would enjoy. Because trusts act on behalf of private individuals rather than employees or owners, they can own annuities and receive tax deferrals while incorporated businesses cannot.

H.R.10 Plans

Even though a business may not be able to use an annuity to provide tax-deferred retirement benefits for its employees, it can use related products to provide some of the same advantages. An H.R.10 plan, also known as a Keogh plan, is available to sole proprietors and partnership owners. It offers a defined benefit or defined contribution option, making it similar to an annuity. H.R.10 plans allow self-employed workers to fund their retirements through their businesses.