Launch A Small Business With Your 401k

If you’re a senior who wants to augment his or her nest egg with a small business, you can use your 401K or IRA funds to do so without having to pay taxes on your withdrawals or obtain a loan. This fairly unknown funding method is becoming a solution for many people who want to run a franchise or own their own businesses. Today, many potential entrepreneurs don’t know that they can have access to tax-advantaged capital to start their own companies or businesses with their retirement account balances.

Using your 401K or IRA funds to start a business via a retirement plan investment is also known as an ROBS or “Rollovers as Business Start-up.” Self-directed retirement accounts such as IRAs and 401Ks may be used towards funding a plan that may legally support private and public stock holdings as long as these are eligible for ERISA and tax law exemptions. For ROBS, 401Ks are most popularly used.

The main concept of the ROBS is the creation of a “C” corporation as stated by law. This newly-created corporation can then sponsor a 401K that openly allows acquiring and holding eligible employer securities. After this, the entrepreneur can roll a part of his or her currently qualified retirement funds (or all of it) into another 401K. The plan is also called an “eligible individual account plan,” which then puts investments into the new corporation’s stock. The business entity, which now has funds, then buys into a franchise or gets a small business.

This procedure is much like what an individual investor does when he or she buys stock in a company or business that’s publicly traded. He or she gives the company money in exchange for holding shares as investment collateral. The publicly-traded company then has access to the money and may use it towards strengthening itself. With the ROBS, it’s pretty much the same, except for the investment being made in a company that’s privately held as opposed to a publicly-traded business.

 

1) It will alert people to your business’s existence.

 

Imagine someone is physically located near your business. They are seriously lacking a pair of shoes, and your business happens to be a small shoe store. That potential customer could log on to Facebook Places from their phone. They’ll see nearby places with Deals as a yellow icon on their map. They’ll be able to see your business – let’s call it Tom’s Shoes – and they can click on your Deal to check it out and claim it. Once they claim the Deal, they simply have to present their phone screen to the cashier when they checkout.

 

2) It will spread your business’s popularity.

 

After the customer has gone to Tom’s Shoes once and discovered how comfortable the shoes are on his or her feet, they will want to go back to Tom’s. This will encourage the customer to visit Tom’s website, like his business on Facebook, and use Facebook Places in the future.

 

3) Friends can shop together.

 

When you set up a Deal for your business, you have the option of allowing friends to shop together and take advantage of each other’s Deals. This would probably be something like a reduced gym membership fee if the person is referred by a current member. This encourages people to suggest your business to their friends.

 

4) You can create a special (and totally unique!) promotion.

 

If a Deal for friends is not your thing, you could set up a Deal where a customer must visit your store a certain number of times to receive a reward. You can also create a Deal in which a percentage of a customer’s money spent goes to a charity. Or, if you and your business have a flare for the unusual, you can do something out of the ordinary. You might give the first 100 people to check in on a certain day a free balloon or a horseback ride – it’s up to you.

 

5) Your business won’t be stuck in the Stone Age.

 

C’mon – every business nowadays has a website and some kind of online presence. Many businesses have at least one page on a social networking site like Facebook. So why not have a Facebook Places page too, where you can offer special deals to tech-savvy customers?