USING YOUR 401(K) OR IRA TO FUND A BUSINESS TAX FREE

Anyone can withdraw funds from their IRA or 401(K) once they reach age 59 years and 6 months without penalty, but for those younger you can still utilize those funds Tax Free to start a new business and create a new job. Here is the procedure to use.

Step 1: Form your Corporation or LLC;

Step 2: You become the employee;

Step 3: The Corporation or LLC sets up a 401(K) or IRA that allows the rollover of existing retirement funds into a new account, a Self-Directed Plan that you run and make all investment decisions;

Step 4: The 401(K) then buys stock (for a Corporation) or units (for an LLC) in your company. If it’s an IRA, it must be a qualified plan.

(note: There are compliance issues that you must meet. While the IRS has not yet considered these transactions illegal, they do look at them very carefully. With that in mind, you will probably need the assistance of a tax attorney or other appropriate professional);

Step 5: Your Corporation or LLC uses the investment funds as Seed Money to cover wages and other working capital needs (you will not be taxed on any of the money going into your new Corporation or LLC as long as you meet the compliance standards. Remember, your new 401(K) or IRA is making an Investment not a Distribution.