Using 401k as funding for your own business

[Johnnybags]

Looks like you can without a tax liability upfront. Many people were wondering how its done. EXAMPLE BELOW.



First he would start a C corporation, a designation that allows a company to issue private shares of stock. Then he would create a profit-sharing retirement plan within his corporation, making it eligible to accept pretax retirement contributions. Finally, he would roll over about half of his retirement savings, roughly $80,000, from his 401(k) into the profit-sharing plan.

As a result, the profit-sharing plan could buy the franchise rights and also provide working capital for his business.

 

[pappy]

http://finance.yahoo.com/focus-retirement/article/105933/Betting-Your-Retirement-on-Your-Start-Up?mod=retirement-post-spending

AArticle from NYT about this.

pappy

 

[BeFranklin]

There's some businesses you could start that there may be a real need for in the near future. For instance, there seems to be a lack of tailoring / clothes repair / shoe repair shops.

 

[fahayek]

Businesses can't use money from a Profit Sharing Plan for business expenses. I think the article should say to set up an ESOP (Employee Stock Ownership Plan), that way any contributions are used to purchase shares of the company.

I'll have to look into this.

 

[angelatc]

That's a great idea unless you consider that a disproportionate amount of small businesses fail.

Gambling with your retirement money is as dumb, if not dumber, as taking out a home equity loan.

If you want to start a business, start small and pay cash for everything.