Don't Gamble with your 401K-Buy a Business in Flotida
Wall Street has created uncertainty for those fortunate enough to have a 401K plan, but the pundits are predicting a slowdown in the economy which may transform your 401k into the 201K’s (Remember the last recession)
Buying a Business in South Florida is the cure for this malady, as the Rollover for Business Start-ups will enable you to use your existing 401k to purchase a business and control your future. The process for doing this is described below by our partner Guidant.
The Rollovers for Business Start-ups structure must be formed correctly in order to qualify under IRS code and generally involves four or five steps. Although complex, these steps can usually be completed in less than three weeks. Here’s how it works:
1. The rollover provider creates a private C corporation for the client.
2. The provider then creates a new qualified retirement plan — most commonly a 401(k) — for the corporation.
3. Funds from the client’s existing retirement account are rolled into the new retirement plan without triggering a taxable distribution.
4. The new plan then purchases stock in the C corporation.
5. The corporation, in turn, uses the investment proceeds to acquire a small business or franchise, and the 401(k) becomes one of the shareholders in the corporation.
6. The new business now is cash-rich and debt-free.
Now, let’s look at a real-world example: say an aspiring entrepreneur wants to start a new business. After reviewing her financing options, she decides the money currently sitting in her retirement account is the perfect way to generate needed seed capital.
Using the help of a company like Guidant, she forms a C corporation. After incorporation, her new business adopts a 401(k) plan that explicitly allows its trustee(s) to acquire and hold employer stock in a private business. The plan allows eligible employees to roll funds over from their eligible retirement accounts into the new 401(k) plan.
Once retirement funds are rolled over into the company 401(k) plan, the plan invests up to 100 percent of those funds (assuming the terms of the plan so allow) into the purchase of company stock. In effect, the money in the owner’s 401(k) plan is transferred to the corporation in exchange for most or all of the company’s stock.
Many of the businesses for sale in South Florida have owner financing available which enables those with a 401K plan to Buy a Business in Florida which is one of the most business friendly places in the county. I should mention that today we have a bit of a chill in the air with current temperature in the low 70's.
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Please contact me by email to learn more:
Edward Sklar
Business Broker& REALTOR
Business Broker South Florida for Me/United Realty Group
Business Broker South Florida
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