Are You Sitting on Undiscovered Business Capital?
Turn your IRA into tax-free funding to jumpstart your dream enterprise
Contact Sharon Faiola Petersen | Visit Website | About The Author
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Although thousands have discovered this golden opportunity, some of the savviest investors are still unaware of this remarkable funding option: You can utilize your IRA monies before retirement age to purchase a business without incurring early distribution penalties.
Thanks to the government's 1974 ERISA laws, you can self-direct your retirement funds into investments that include purchasing a business and/or franchise. Have your eye on a corner taco stand? Thinking of turning your love for animals into a pet-grooming shop? Funding your dream enterprise with retirement monies is a dynamite option for those wishing to take control of their future by going into business for themselves.
The Benefits
While individual retirement account (IRA) funds could be used in this way for the past three decades, it's only been in recent years that people have taken a closer look at personally controlling the investments made by their IRAs both in and out of the stock market. More specifically, an increasing number of new business owners are enjoying the benefits available to them through what are commonly known as "self-directed IRAs."
By using an IRA structure similar to that of a self-directed retirement account to purchase a business or franchise, you can save money, increase your retirement account value, and even offer a 401(k) to your employees. It's ideal for those who want to avoid taking out loans to finance a start-up business. Or, if your retirement funds can't cover the full purchase price, the structure allows for multi-party purchases – a perfect set-up for husband and wife teams. You can even combine your retirement money with loan money. All these options allow you to start your business with significantly less overhead, which translates into greater profits.
For example: To finance a $200,000 business, a 10-year 10.75% SBA loan could stunt your growth for the first 10 years. However, a similar business funded with retirement monies would not be subject to debt payments. Thus, the over $2700 you would be paying monthly on your loan could be reinvested instead into your business to increase your growth rate.
It Gets Better!
Using retirement funds to finance your entrepreneurial endeavors could mean much higher returns within your retirement account, since company profits not expended on loan repayments can be deposited back into the account. In this way, your retirement nest egg grows along with the success of your business. Profits funneled into your retirement account are tax deferred, just like earnings from traditional stock-market investments. Over time, this could save you thousands in tax dollars.
These self-directed account structures provide a surprising amount of flexibility. Plans such as these allow for investments into new or existing businesses. Other plans are structured to allow for investments in real estate, vacation rentals, hard money lending and much more. Into real estate flipping? You could combine your interest in real estate with your desire for self-employment by forming a Real Estate Operating Company (REOC). Want to invest in shrimp farms in New Orleans or timberland in New Zealand? With the right self-directed account structure, you can do that, too.
According to David Nilssen, president and CEO of Guidant Financial Group, a retirement account facilitation company headquartered in Bellevue, Wash., "Most people don't realize they can make substantially more with their IRA and earn this in investments that traditionally are more secure than the stock market, like real estate and tax liens. Yet less than 4% of the 16.4 trillion dollars in retirement funds are held outside stocks, bonds and mutual funds."
Getting Started
Restructuring your IRA (or other retirement accounts, like 401(k)s) to allow for a business or franchise purchase is best left to professionals experienced in such matters. While no taxes or penalties are trigger
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| As the Marketing Copywriter for Guidant Financial Group, Sharon Faiola Petersen is dedicated to sharing the good news about self-directed IRAs in language accessible to industry professionals and non-professionals alike. Sharon has had numerous articles published in newspapers and magazines across the country and has received a number of awards for her feature, fiction and screenwriting work. She lives in Kirkland, WA. |