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| Your Resource for Wisconsin Franchise and Business Opportunity Information |
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401K/IRA Rollover |
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Some
investment experts question the wisdom of putting a retirement nest egg
into a small business, so certainly consider your risks. But proponents
say there is no better investment than yourself and your skills. You'd be
totally in control but also totally responsible for your retirement money.
Such
uses of self-directed retirement plans - allowed in the federal Employee
Retirement Income Security Act of 1974 - are marketed to would-be
businesspeople under various names, such as Entrepreneur Rollover Stock
Ownership Plans, Rainmaker Plans and Audeo. This is not something that you
can do yourself and will need the help of one of several companies
specializing in this field. Basically,
here's how it works. With the assistance
of an attorney and retirement-plan expert, a regular C corporation is
created. You would be president and perhaps your wife as vice president.
The new corporation establishes a retirement plan and a trust bank account
is created at an appropriate bank. Next, rollover your present retirement
plan into this new plan. As the new plan's trustee, you could use the
capital to buy shares of your new business. Just a few of the benefits from this type of financing
are: ·
Reduce or eliminate debt: By purchasing all
or a majority of the business with IRA funds, the amount of debt is
eliminated – or greatly reduced, thus significantly reducing company
overhead. ·
Increase business success rate: New
businesses that carry significantly reduced overhead have dramatically
higher success rates. ·
Increase your IRA value: Investing in your
business is like investing in a publicly traded company - as your company
grows, so does your IRA. ·
Faster funding: This process is typically
completed in less than 21 days, where other funding options take
considerably longer. ·
Doesn't pledge your assets: This funding
solution does not require you to pledge you home, credit or assets as
collateral. Because
this is an investment, you don't have to make payments as you would with a
loan. This eliminates or greatly reduces your startup loan expense
so you don't have that pressure on your revenues. When the business is
generating sufficient profit, you can re-fund the retirement plan. Typical charges are about $1,000 to set up a corporation and $4,000 more to execute the rollover and obtain an IRS determination letter that the plan qualifies under federal law. Annual maintenance fees are $800. Prices may very, so be a wise consumer. Using
your retirement funds to fund your new business is a personal choice.
Weigh your options and utilize trusted advisors. For additional
information and referrals to companies specializing in this procedure,
call 800-959-3440.
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taxes plus penalties for withdrawing money before age 59 1/2 . Those costs
can be avoided through a self-directed retirement plan that lets you
roll money into your own corporation's retirement fund and invest the
money in the business. When structured properly, this method can meet
Internal Revenue Service requirements.