Have you ever wanted to start your own business using your existing retirement funds without paying taxes on those funds? This is all possible through a self-directed 401k that we refer to as a mySOP.
What is a mySOP (self-directed 401k)?
An Employee Stock Ownership Plan referred to after this as a “mySOP”, is a form of a 401(k) plan set up for your own C-corp. The mySOP’s purpose is to purchase the shares of your own C-corp. This structure is designed to get cash from your 401(k) or IRA into a corporation.
This is necessary in order for start-ups, small businesses or cash-strapped companies to tap cash from their pension accounts.
This strategy can also be used when recourse lending is required and access to cash is also a need.
Setting up a mySOP is easy with our help. Here are the steps to set up a mySOP:
- Create C-Corp. Accuplan will create the entity with the appropriate state.
- Create the mySOP Plan (Trust with Plan documents). Accuplan will create the Plan and file with the IRS.
- Roll over all or some of your monies from an IRA or 401(k) to your mySOP.
- Set up Checking Accounts for the Company and the Plan.
- Direct Investments by purchasing stock in your C-Corp with pre-tax mySOP monies.
Why would you want to set up a mySOP? Here are the benefits of the 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.
- Provides capital for startups or other cash-strapped businesses.
- Provides for recourse loans when non-recourse loans are not available or practical.
- Can be used in conjunction with a standard 401(k) or stand-alone
Author: Ben Barker, Self-Directed IRA Professional