Have you ever wanted to start your own business but don’t have the funds available to start the business? Maybe you have been laid off and have funds sitting around in your 401k. Now could be the perfect time to start that business you always wanted to start. Why not use the funds in your 401k to start the business? We will be discussing how it is possible to use your retirment account to fund that business you want to start.
How can this be done? The answer is with a Self Directed 401k that we refer to at Accuplan Benefits Services as a Mysop. With a Mysop you can utilize IRA or 401k funds to help start and fund your new business. It is a great way to infuse cash into your business rather than trying to get financing. It can also help in the event that you still need to get financing but the lender is requiring that you have a certain amount of cash in the business in order to do the loan.
How does a Self Directed 401k (Mysop) Work?
- Create Entity. The entity must be a C Corp. Accuplan Benefits Services will create the entity with the appropriate state.
- Create the Plan (Trust with Plan documents). Accuplan Benefits Services will create the Plan and file with the IRS.
- Rollover monies from IRA or 401K to your one.K plan.
- Setup Checking Accounts for the Company.
- Direct Investments by purchasing stock in the C Corp
What are Some of the Benefits of a Self Directed 401k (Mysop)?
- Allows for retirement cash to be placed into a company without it being a loan.
- Eliminates many of the prohibited transaction problems when conducting business. For more information about this see previous blogs about prohibited transactions inside of an IRA.
- Provides capital for start ups or other cash strapped businesses.
- Provides for recourse loans when non-recourse loans are not available or practical.
- You control your retirement plans rather than relying on another person. You are much more concerned with how your retirement plan performs than any investment advisor.
Below is an Example of How a Self Directed 401k (Mysop) Could Apply to You
- Accuplan creates a C-Corporation.
- Accuplan creates your personalized mySOP plan and your C-Corp adopts the plan. A 401(k) is also established for later contributions.
- Bob and Carol roll over some of their IRA monies into the mySOP.
- Bob and Carol, acting as Manager and Trustee, set up bank accounts for the C-Corp and the 401(k).
- Bob and Carol, acting as Trustee of the mySOP (Self Directed 401k), purchase shares of the C-Corp which will be the bed & breakfast.
- The C-Corp now purchases the bed & breakfast from the current owners for $500K.
If you have any questions or would like more information about how you can use your retirement funds to start a business please contact us at Accuplan Benefits Services. You can contact me with my information below.
Author: Ben Barker, Self Directed IRA Professional