I am thinking starting/purchasing a franchise business using my retirement fund. I am currently a federal employee and my retirement fund is in what is called a Thrift Savings Plan (TSP), which is the Federal government’s equivalent of a 401K plan. I have the following questions before I start the process and hope you can answer these for me.
1.
After setting up the new 401K for the “C” corporation, who holds or has
access to the account? The 401k funds are held
at Fidelity Investments inside a brokerage account in the name of the 401k.
Subsequently, the funds are wired from the brokerage account to the
corporation's bank account. We never have access or touch the funds.
2. Does the new business need to be 100% owned by my 401K? No the 401k is not required to own 100% of the business.
Often times, the business owner will also invest personal funds into
the
business and thus receives stock in return.
3. My 401K funds may not be enough for 100% of the business.
I may need to take a business loan of $50K to 100K. Preferably a
small business loan. Is that possible with this type of an arrangements? Yes, whether, an SBA, a bank or seller financing.
4. Do you assist with SBA or other business loans as needed? Yes with respect to providing the lender with all the
applicable 401k supporting documents.
5. I will leave about $50K in my 401K after opening the business.
Would I be able to take a loan against this amount if it meets the 401K
loan rules for real estate or hardship? Yes the
plan allows for 401k participant loans. The participant can borrow 50% of
the balance not to exceed $50,000 and the borrowed funds may be used for any
purpose.
6. How long does it take from the day I sign the agreement with you to
actually have the funds available for investment? It
generally takes 10 to 15 business days; however, based on our experience of
transferring a TSP using Form TSP-70 (attached) it could take up to 20 business
days, but it generally 15 business days.
7. I will have a separate business in addition to this, would it
be safe to assume that I can have a separate 401K for this other business as
well subject to IRS limitations of what I can put in all 401Ks for myself and
my spouse. Yes that is correct.
More Information
Use Retirement Funds to finance my business
Solo 401k Loan
More Information
Use Retirement Funds to finance my business
Solo 401k Loan
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