Tips for Using Retirement Funds to Inject Capital into Your Business

Written By Steps To Faculty Published September 30th, 2010

Money from a well designed retirement plan can be used to finance business start-up costs, purchase an existing business or even purchase a franchise. For the process to work, you must roll over funds from your existing retirement plan into a new plan for yourself and the new employees of your company. When done in accordance with the Internal Revenue Code, participants will be permitted to invest in shares of the sponsoring company. Before you jump into this idea, you should consider these six tips for using retirement funds to inject capital into your business.

Step 1. Put your plan to work for you.

Before you count on your retirement funds being available for covering business start-up costs, make sure it can be rolled over. If your funds are in an employer’s retirement plan, you will generally be expected to terminate your employment there before the funds will be available to you. Plus, that plan must support rollover funds in the first place.

Step 2. Consider the debt to equity ratio.

Especially when you are hoping to use retirement funds to finance business start-up costs, you should consider how this will help build equity in your company. When used alone or alongside debt financing, you will have a head start on building your business’s equity to help protect the personal assets you may have pledged as collateral for the loan.

Step 3. Get a fresh start.

In the economy of today, you can start anew like thousands of other new business owners each year. With a wise usage of retirement funds, you can provide yourself with self-reliant funding for your business.

Step 4. Continue to save for retirement.

Complying with rules and regulations is crucial to your success. The point is to help you and your employees save for retirement. Invest rolled-over assets in stocks of the new company to allow it to continue to grow.

Step 5. Obtain professional services.

The process is complicated and to improve your chance of success, you will want a professional by your side to guide the way. Once your business startup costs are covered and your plan is established, a professional can help your plan to remain compliant.

Incorporate a new business, adopt a company retirement plan, roll-over the assets from an existing retirement plan, and invest rolled-over assets in company stock. Take your time, do your homework, and work with a professional. Please visit stepsto.com for more great business advice.


Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

My name is Roger Due and I am from Albuquerque, New Mexico and I am the owner of the Monsano software company. This has been an absolutely fantastic conference. This is the best I have ever been to.