Can I use my 401k as an investment in a new startup business?

Question

I'm curious if i can roll my 401k without penelties if i use it as an investment into a new startup business.

Answer 1

Don't do it. Whether you can or not is irrelevent, but you should not touch your retirement money. Most new businesses fail, and it would be tough to replace that money.

In legal terms though, yes, you would be penalized for taking the money out early.

Answer 2

Yes, you can if you are able to roll your 401k into an IRA.

Most 401k plans do not allow you to roll money out of the plan but
some do. Or you can do the rollover to an IRA when you leave the company.
You must roll the money into a self-directed IRA that allows you to invest in private equity. Most custodians of IRA plans do not allow this, but there are some that do.
You may also have to set up an LLC inside the IRA according to the guideline of the custodian.

Answer 3

Yes you can. The basic steps are: set up a C Corp. Have the C Corp establish a special 401(k), rollover your 401(k) or IRA to the new 401(k), have the C Corp issue stock called Qualifying employer securites to be purchased by the new 401(k). Cash goes from the 401(k) to the Corp to be used to grow the business, you take salary from revenue. The 401(k) owns the stock tax deferred. No withdrawal penalties or taxes. Check out http://401kfinancinginsiders.com/

Answer 4

Almost certainly not. Check with a tax advisor to be sure, but it is certainly against the spirit of 401k (not to mention, unwise) to finance a high-risk investment with your retirement money. And a startup business is almost by definition high-risk.

Answer 5

Technically no, the IRS do not like the ideas use tax-shelter to fund another tax-shelter (like business expense,all kind of deduction)

The only thing you could do is withdraw as a LOAN to fund your business and paid it back.the IRS limit is for a loan is 50K.

but be careful,if the business doom, all thing bust loose. If the business have great return, that themost reward thing to do

Answer 6

I believe you have to pay a penalty for early withdrawal but you should check with you advisor...the person that helped you set up the account. They can answer. It might differ based on the company policies.

Answer 7

No. The only way you do not get penalized is to roll it over into a IRA. Or you have to be over a certain age to not get a big penalty.

Answer 8

You will incure penalties