QUESTION: My name is Ted and I am in the
process of purchasing a business and would like to use my 401K and my roth
funds as part of the purchase funds for the business. The business I will
be purchasing has a building as well as equipment and a business. I will
be a 50% owner of the business and would also like to use other funds,
non-retirement funds, to assist with the purchase of the company. Can
you/your company assist with the structuring of this transaction so I do not
have to pay a government penalty or taxes? What is the cost of such a
program if you do assist? How long does it take?
Thank you for your assistance and
response today if possible.
Sincerely,
Fred in Texas
ANSWER: Here is some general information. About using retirement funds such as a 401k
plan to fund your own business.
Only pretax retirement funds may be used to finance a
business that the 401k owner plans to operate; therefore, Roth funds do not
qualify (both Roth IRA and Roth 401k).
The use of pre-tax retirement funds to finance one's own
business is referred to as ROBS 401k (rollover as business start-up). At a
high level, this concept requires the use of a C-Corporation because the 401k
buys stock (employer securities) in the C-Corporation. Even though and
S-Corporation offers stock, the S-corporation regulations do not permit 401k
shareholders.
Regarding
pricing, please click here.
