A Rollover as Business Startup is a unique program that allows you to use existing tax-deferred retirement savings to startup, acquire, or expand an operating business.
For entrepreneurs looking to start or grow an enterprise there are many benefits to self-funding with retirement savings as compared to other capitalization options.
Invest in Yourself
Nobody is going to protect and grow the value of your retirement savings like you are. By being able to invest in your own business and fund your dream, you can rest assured that your money is in good hands.
If are successfully with your venture you can benefit today with a paycheck, while also building up the value of your retirement savings.
No Tax Penalties
With the Business Funding IRA, there are no taxes or penalties for accessing your retirement funds. Your savings is still in a qualified retirement plan. That retirement plan just becomes a shareholder of your business.
Avoid Debt or Personal Collateral
Utilizing your own retirement savings to fund your business may allow you to avoid seeking a loan. That means you won’t need to sign away your personal assets as collateral. You can also eliminate the complexity and expense of the loan application process.
Have Greater Control
While it is still possible with the ROBS plan to have outside investors, you may not need to. By not being beholden to investors or bank debt, you can have much more control over how you grow and operate your business.
Faster Path to Profitability
By avoiding debt and being cash flush, your business can achieve profitability much more quickly. The likelihood of business success is also much greater when you can operate in the black.
Pay Yourself a Salary
As part of the business funding structure, you must be a compensated employee of the business. This means you not only can, but must draw a reasonable salary. Knowing that you can draw income from your business puts you in a much stronger position to pursue your dream.
Tax Savings with 401(k) Contributions
As your business starts producing income you can shelter your compensation in the form of generous contributions to your 401(k) retirement plan. You can contribute up to $57,000 as of 2020. If your spouse also works in the business, they can contribute as well. These contributions allow you to reduce your tax burden while continuing to grow future wealth in your retirement plan.
Diversify your Retirement Savings
Being able to invest in your own venture is the ultimate form of breaking free from limited investment options available to most corporate retirement plans. Of course, in addition to owning shares of your corporation, the 401(k) can still hold conventional investments.
Attract and Retain Quality Employees with a 401(k)
If your business will involve employees, offering a 401(k) retirement plan is a desirable perk most small ventures cannot provide. Because you need to put the plan in place to obtain your own self-funding of the business, that means the hard work is already done.
Ability to Secure Additional Loans
While there are benefits to operating your business debt-free, some ventures require more capital than others to achieve success. You can augment your retirement funding with conventional business funding such as SBA loans if you choose. Because of the solid cash investment made by your plan, you will be in a better position to speak with such lenders if you choose.