Before reading further, PLEASE CONSULT LEGAL ADVICE.
Rollovers as Business Start Ups
On this website I have advised that you start small and not risk your retirement funds. However, if you need some of those funds to start your Retirement Business and you are concerned about having to pay heavy taxes for withdrawing them – there is one little know secret called Rollovers as Business Start Ups (ROBS) which could help you avoid paying any taxes and avoid even the 10% penalty for early withdrawal.
Here are the steps:
- Form a regular C corporation.
- Have your corporation start a qualified retirement plan.
- Rollover your pretax retirement 401(k) and IRA fund to this new retirement plan.
- Then the retirement plan can invest its funds in the purchase of stock in your corporation.
- Now your corporation has funds to use in your retirement business.
Drawbacks: Unless you are an expert you might have to pay hefty fees for help in setting up a qualified retirement plan. You can’t use Roth accounts because that money is post tax. And the I.R.S. might look unfavorably on this unless it is done right especially if your are under 59 ½.
Check out these links and get legal advice before proceeding.
You may have built up considerable money in your 401(k) at a job or in your IRA and now you want to start a business or turn your sideline venture into a full-time activity. Can you use the money in your retirement account as capital for your business without incurring a tax bill? If you follow the rules carefully, the answer is a qualified yes…..
(ROBS) are arrangements in which current or prospective business owners use their 401(k), IRA or other retirement funds to pay for new business start-up costs, for business acquisition costs or to refinance an existing business. ROBS is an acronym from the United States Internal Revenue Service for the IRS ROBS Rollovers as Business Start-Ups Compliance Project.
Check out this link for more ideas. Hundreds of Retirement Business Ideas.
For more information check out my books