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Using a Self-Directed IRA to Fund your Startup

fund startup

Owning your own business is the ultimate dream of many Americans, and those lucky enough are able to make that a reality. Unfortunately, it’s not drive or ability that gets in our way of making our dreams a reality, it’s very often money, and money alone.

Now, you definitely could make your way to the bank, apply for a loan, and possibly get denied, or you could seek out potential investors that could take months to solidify, or you could do it yourself. Fund your dreams with a self-directed IRA, or with an ESOP.

First, What’s an ESOP?

ESOP stands for Employee Stock Ownership Plan, which allows a company’s workforce to purchase stock ownership in the company, usually at no upfront cost to the employees. By giving plan participants an interest in seeing that the company’s stock performs well, these plans are believed to encourage participants to do what’s best for shareholders, since the participants themselves are shareholders. Employees are provided with such ownership often with no upfront costs. The provided shares may be held in a trust for safety and growth until the employee retires or resigns from the company. Once an employee retires or resigns, the shares are given back to the company for further redistribution or are completely voided.

Self-Directed IRAs

Most people don’t realize that IRAs aren’t just restricted to stocks, bonds, annuities, CDs and mutual funds. But when they think about the mechanics of it, it’s obvious that they can own a business in their IRA. After all, what is stock ownership but ownership of a fractional interest in a business? Owning a whole business in an IRA, then, is no different than owning all the stock of the business in the IRA. In fact, they can invest their IRA assets in nearly anything they can conceive, as long as it is not expressly prohibited by law, such as collectibles, art, antiques, and so on.