You’re ready to begin your dream of opening a business, but you’re hesitant to take out a small business loan and pay interest on it. Fortunately, there is another alternative. You have the option to use your 401(k) to start a business – without paying upfront taxes or early withdrawal penalties.
How 401(k)/IRA Business Funding Works
HOW TO USE YOUR RETIREMENT FUNDS TO START A BUSINESS
STEP 1: SET UP A C CORPORATION
The process begins with establishing a new corporation using the proper legal structure to support the establishment and operation of the company’s qualified retirement plan.
STEP 2: DESIGN A NEW QUALIFIED RETIREMENT PLAN
To avoid early withdrawal penalties and preserve tax-deferred status, a new retirement plan is created for which you’ll move your existing funds. We will customize your plan, considering the needs of your business and employees.
STEP 3: TRANSFER YOUR RETIREMENT FUNDS INTO THE NEW PLAN
After the corporate retirement plan is in place, you’ll need to identify an appropriate plan custodian. This custodian creates the new account according to the plan’s design and specifications. If you’re rolling over funds from a 401(k), your plan custodian will work with you to fill out temporary IRA documents, although you will have to initiate the rollover. If funds are being rolled from an existing IRA, your plan custodian will initiate the movement of those funds.
STEP 4: USE THE RETIREMENT PLAN’S FUNDS FOR YOUR BUSINESS
The rollover funds can now be invested in the newly formed C Corporation by purchasing stock in the corporation. The stock purchased by the plan is credited to your account based on your investment decisions. You have the capital to start, purchase or recapitalize your new small business or franchise.
PRODUCT PROFILE ELIGIBILITY
Rainmaker Plan 401(k)/IRA Business Funding Access existing retirement funds to start or purchase a business, tax deferred and penalty free.
- Rollover funds from a qualified retirement plan to start a business
- No early distribution taxes or penalties
- Minimizes going into debt for the start-up
- No business financials are required/applies to new and existing businesses Business sponsors a qualified retirement plan to create wealth
- Can be used to expand the business or provide additional working capital
- Amount and type of retirement funds determine eligibility
- Up to 100% of existing funds available for use
- Sufficient qualified retirement plan: 401(k), IRA*, 403(b), PSP, SEP IRA.
- Other plans may qualify. Call for details. *Roth IRA ineligible