Can a 401K or an IRA account be used to start a business and aviod paying the tax or early withdrawl penalties

Question

This is to acquire franchise rights and build out a location.

Answer 1

The only legal method I can think of is the Self Directed Roth IRA will allow you to start for example a Real Estate venture all money in vested and profits made run thru the Roth tax free.

Also if you do don't have enough money in you Roth to start you can find partners with a Roth and buy the real estate jointly/partnership (partner 1 owns 50%, partner 2 owns 50%)
the expenses are then split as well as the profits by the number of partners.

go to google and search "real estate IRA" will list many companies. www.pensco.com has an e-book you can download

Answer 2

If the provisions of the plan allow it, you can take a loan without the horrendous penalties that come with early withdrawals. However, you are then banking your retirement money on a business venture. If the business fails you will still have to pay back the plan and you will have lost the tax-free growth in the plan in the meantime (because the money you use to pay back the principal borrowed from the plan will come from income that is taxed).

This sort of borrowing is really a last resort. If this is your only means of raising capital at a decent interest rate I would urge you to think if this venture is a good idea in the first place.

Have you tried the Small Business Administration? You can get loans from them through your bank, so speak to them and see what they can come up with. A business plan will help, so you might want to engage a CPA.

Good luck with whatever you decide to do.

Answer 3

not once you do it or have performed as a trustee to trustee move from the 401K trustee on for your IRA account holder trustee then you truly does not contact any of the 138.40-one in any respect and it ought to then all be on your IRA account on the prompt on your existence with no need to pay the ten% early withdrawal penalty plus the federal income tax at your marginal tax price once you wisely finished your 1040 federal income tax go back for the tax 365 days that you opt for to attempt this in. in case you do opt for to get the money in to fingers and then do the ROLLOVER interior the 60 income tax loose rollover era it truly is for sale to you for this purpose think ofyou've got to operate the quantity that they are going to withhold decrease back into the 401K quantity that you acquire with techniques from examine to make up the entire 138.40-one for the entire 401K distribution that you be rolling over for your IRA freed from any federal income tax and also you does not have any quantity of the early withdrawal penalty which think ofyou've got to pay once you do finished your 1040 income tax go back in the course of the subsequent 365 days tax filing season. do exactly not ignore that the rollover of the money with techniques from you in case you do acquire the quantity has be performed previously the properly of the 60 day income tax loose time period ends. wish that you discover the above enclosed techniques sensible. 09/13/2011

Answer 4

I'm no Finance expert, but I would surely think not since both are personal retirement accounts. I think the only early withdrawals permitted without penalty are to pay child's education, purchase 'first house' and if you can prove a fincial hardship.

Answer 5

you can use it but you will pay taxes and penalties. but you will also have new deductions so it may even out. talk to your accountant.