PARKED
IRA to fund business?
I have partial funding for my new business, but I need to secure some more funding before I pull the trigger. Until recently I have always considered the money in my traditional IRA accounts to be off limits. I knew that there were ways to use them, but I wanted to leave these alone in case I ever needed a safety net. I have now changed my mind about using these IRAs to start the business (partially a result of reading MJ's book). I am in the process of exploring the feasibility of this.
I do not want to take on partners and am trying to start this business debt free. In the initial phases of this business, there will not be enough profit to support repayment of a loan. The plan for my new business is to keep risks low and operate it as a sole proprietorship to enjoy the tax benefits of that structure.
I have been reading about companies such as Guidant that create a C Corp to allow use of an IRA to invest in your own business without tax penalty. The problem with this is, it creates a more expensive structure. I am wondering if I might be better off just making an early withdrawal from the IRA and paying the taxes and penalties so that I can keep the structure as a sole proprietorship.
Does anyone have any experience or advice on this? Has anyone used Guidant or have another company to recommend?
205 kph
I have worked with Steve at Take Control of YOUR Retirement with Check Book IRA. He is very knowledgeable. Tell him I sent you.
PARKED
GlobalWealth,
Thank you for the recommendation. I did some research on Steve Sheppherd's IRA Checkbook. It looks like a good program and people had good things to say about him, but I don't think this format will work for me. It is designed to invest in real estate and businesses that are owned by others. Since I own the business I am considered a disqualified person and the IRS views this as a prohibited transaction.
The Guidant program is different because it is designed to invest in a business that you run and draw a salary from. I have been researching this format more as well and am stating to think this may not be what I want to do. I welcome any additional input or recommendations.
PARKED
I spoke to Guidant yesterday. The rep was very knowledgeable and a good salesman. He alleviated many of my concerns, but now I have some new ones.
The company stopped providing these types of services in February of 2009 due IRS concerns over the terminology of ROBS (Rollovers as Business as Business Startups). I am still unclear as to exactly what happened to alleviate these concerns and to make them start offering these services again.
I still have concerns about operating a a c-corp. I am now less concerned about the tax structure, but more concerned about the recurring general operating expenses of this structure. The Guidant structure is a complicated arrangement. It involved maintaining a 401k plan which requires record keeping that I am not familiar with. Of course Guidant offers these services at an additional monthly charge. I also foresee higher CPA fees from structuring the company like this. I don't think that these fees will be huge, but I am very concerned about keeping my overhead as low as possible.
Does anyone have any experience with 401k record keeping? Is it something I could do myself or is it best left to a specialist?
Does anyone have any comments about the differences in CPA fees for a c-corp versus other business structures?
There is another company called BeneTrends that offers a similar service, but at first glance, seems less polished than Guidant. Is anyone familiar with BeneTrends?
190 kph
Many people will probably disagree with me on this, but if you've done the due diligence, really believe your business could hit a homerun (aka is fastlane), & can afford to lose it all...
Cash it out, take the tax hit, and take control of your retirement. After all, what is an IRA / 401k? Isn't it a planned retirement account? Well, if you believe your business will go fastlane, plan on retiring early.
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