If your ready to transition for employee to entrepreneurship, once you decide what you want out of life the next thing you need to do is figure out how your going to pay for it. If you have significant money in your 401(k) or IRA and now your ready to turn your side hustle into a full-time business, you can use the money in your retirement account as capital for your business without incurring a tax bill. But you must follow the rules carefully, or you could end up with IRS trouble and no retirement nest egg. Rollovers as Business Startups (ROBS) Rollovers as Business Startups (ROBS) is a way to use the money in your retirement account to fund your start up business. If you have a 401(k) or other qualified retirement plan with a balance that’s sufficient for you to use to invest in your business, it’s a good potential option. To establish a ROBS account, you must first incorporate your new business as a C-Corp and then set up a qualified retirement plan for that business that can buy private stock. Then you roll over your 401(k) or other retirement account to the new retirement plan. You can do the rollover is tax free. That plan then buys shares in your corporation. Essentially the retirement plan becomes an owner of your business. Benefits of using ROBS
Downside to ROBS. There are significant risks to this approach.
QUALIFYING FOR ROBS IS EASY
Using ROBS has many benefits, especially when combined with traditional funding methods such as SBA loans. It’s ideal for those who can’t afford or don’t want to pay their down payment out-of-pocket. If you are considering a ROBS, be sure to have your own financial planner and or tax advisor review your program to keep things compliant as an IRS audit is certainly not out of the question. It may be tempting to use funds in retirement plans to fund or buy a business. But your business venture may not work out. You could face a significant tax bill, and even worse, lose your retirement savings. Proceed with caution. The post How to leverage your retirement funds to start a business appeared first on Succeed As Your Own Boss. from https://succeedasyourownboss.com/how-to-leverage-your-retirement-funds-to-start-a-business/
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AuthorHello I am Teri Crawford 26 years old living in Toronto, Canada. I have recently finished my MBA and planning to start my own business. Archives
November 2018
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