How it Works
To understand how you can finance your new or existing business with your 401k, IRA or other qualified retirement plan, you must understand how to access your savings without taxes, penalties, or interest.
You can use your Retirement money, including 401(a) pension, profit sharing, 401(k), 403(b), 457, other qualified retirement plan, IRA and rollover IRA to fund your own franchise, business start-up or business property.
The Internal Revenue Codes permitting these transactions go back to 1969. They were reorganized and expanded with the passage of the Employees Retirement Income Security Act (ERSIA) of 1974. 1978 saw the expansion of Salary Deferrals with 401(k) plans. The expansion of the stock market during the 1990s and the extension of individual participant investment control of 401(k) accounts led to a burgeoning desire for these plans.
There are legal strictures to redirect your locked retirement funds in retirement accounts, directly into a new or established business without it being a distribution (therefore NOT taxed or penalized). The money may be used for franchises, property, equipment or working capital.
Starting in 2005, the IRS increased its auditing of all employee plans and plans investing in employer stock received heavy scrutiny. Therefore you need to have an experienced retirement plan administrator to make sure that your qualified retirement plan is compliant with all IRS rules and regulations.
The cost to setup these types of qualifed retirement plans range between $4,000-$5,000 and then $800-1,300 annually.
For an explanation of the process go to ERSOP® Plan Scenario and the ERSOP® plan Presentation.
For more information contact SDCooper Company
Steven Cooper, QPA
Karen Franklin, CPA
Noel Conway, Esq.
They have more than 20 years of experience. More than 1,000 of these plans have qualified with the IRS.