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Strike a Match

Offering company stock in your 401(k) plan can be risky business--learn how to avoid getting burned when playing with matches.

This story appears in the April 2005 issue of Entrepreneur. Subscribe »

Matching employee contributions in company stock in a 401(k) plan sounds like a surefire move. You gain a competitive tool for attracting and retaining talent and give employees more of a stake in the company's future success. At the same time, you give your share price a boost and get a tax break on the contribution without having to tie up precious cash.

"I think it's an excellent idea--if you know why you're doing it," says Jeff Robertson, attorney with Portland, Oregon, corporate law firm Bullivant Houser Bailey PC. But too often, he says, business owners are motivated by the tax break and fail to protect themselves from the fiduciary risk.

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