401K Business Funding Rollover Plans
How to Use Your 401K or IRA Account to Buy or Start Up Your Own Business.
A Sad Story That Happened Over and Over Again.
Twenty-one years ago, I cringed when friends cash out their 401K accounts to get the money to invest in a business of their own. And paid 40% of their life savings to the IRS in taxes and early distribution penalties.
Then, with the help of top pension attorneys and third-party administrators, we put together a tax-deferred “rollover” procedure. Surprisingly no one knew it had been allowed in codified law since the passage of the ERISA Act of 1974!
With this new replacement plan procedure, we had hundreds of our clients who were able to avoid taking taxable “distributions.” That meant they could prevent writing a check for $40,000 to the IRS (on a $100,000 balance in a 401K) and invest that money into their new business!
How Does This Work?
With the adoption of a 401K business funding plan, you are allowed to convert your 401(k) into privately-held stock in your new business with no taxes or penalties due.
For this tax-deferred transfer we create a 501(a) trust and couple it to special “exemption clauses”.
In this way, you would not be “cashing out” your 401(k). When you invest these savings into a business, the IRS accepts this as a tax-deferred “rollover” which allows you to keep the 35% to 40% you would have paid in early-distribution taxes and invest that extra money in the business. It’s pretty much a no brainer.
We have helped hundreds of clients over the past two decades get tax-free access to their 401(k), 403(b), 457, and IRA funds to buy or startup their own businesses.
This is a great alternative to borrowing money from a bank since you won’t have to pay back any principal or interest payments.
Below is a comparison between “cashing out” your 401(k) versus “rolling over” these savings on a tax-free basis. As you can see, It’s basically a no brainer.
For additional details please send me an email today to firstname.lastname@example.org, or fill out our online contact form with your name, email address, and any questions you may have. We will get back with you on the same day.
Here Are the Numbers
A NEW BUSINESS
|Amount in retirement fund:||$ 100,000||$ 100,000|
|Mandatory 20% withholding for taxes:||$ 20,000||0|
|Cash available to withdraw:||$ 80,000||$ 100,000|
|Tax consequences of withdrawal:|
|Federal income taxes (at 28%)||$ -28,000||0|
|Early distribution penalty (10%)||$ -10,000||0|
|State income taxes (2%)||$ -3,000||0|
|Total taxes & penalties:||$ 41,000||0|
|Compare with the cost to set up a 401 Business Funding Plan:||$ 4,950|
|Net cash available:||$ 59,000||$95,050|
|Percent of retirement funds retained:||59%||95%|
|Additional cash without taxes & penalties.||$ 54,050|
HOW TO GET AN SBA LOAN DOWN PAYMENT
Fund your new business with a 401K rollover.
For over 20 years we have helped hundreds of clients roll money out of their 401k to buy or startup their own business.
Our clients are in all states and have provided a large number of 401K business funding rollovers in Los Angeles, CA.
When you invest money from your 401K or IRA account to fund a business, you get to keep that 35% you would have paid in early distribution taxes. This type of transaction is considered a tax-free rollover. So for example instead of writing a check to the IRS for $35,000 on a $100,000 401K rollover, you get to keep that extra money to put into your new business.
And there is no bank loan or interest to pay back because you are investing your own money.
When you are ready to help you get funding for your own business using your 401K business funding rollover plan in Los Angeles, CA.
We go through all of the 401K rollover steps required by law in behalf of each of our clients. Our firm creates the documents and processes the forms. By the way, our fee is 40% lower than what other firms charge.
EXCLUSIVE: In 2003, our firm worked with the Small Business Administration to create “waiver request” documents that would allow our clients to use their 401K for the down payment required to be eligible for an SBA loan.