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21 Mar 2017
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Can I Use Retirement Funds to Buy A Business Without a Loan?

DRDA CPAs & Business Consultants provides a self-directed 401k plan that we call the BORSA (Business Owner's Retirement Savings Account) Plan.  The IRS refers to this structure type as a ROBS (Rollover as Business Start Up) Plan. By whichever name a BORSA Plan allows entrepreneurs to access retirement funds TAX AND PENALTY FREE if being used to start, buy, or fund an active business.

 

Many people use a self-directed IRA to make passive investments in real estate. This structure is fine for some but there are several severe limitations:

 

1. You cannot be materially involved

2. You cannot direct

3. You cannot derive a salary

 

A BORSA Plan on the other hand allows you to do/be all three.  If you are going to be in the active business of Property Management - either buying and leasing commercial or residential properties or buying and flipping properties a BORSA Plan could work for you.

 

The basics of how it works are these:

• DRDA Establishes the required C Corp and 401k PSP for the client

• Client rolls from a prior 401k/IRA/other qualified plan(s) into the new 401k plan we establish.  This is a qualified rollover so there are no tax or penalties.

• Client invests from his 401k plan.  Instead of buying stock in IBM or someone else's business they are going to buy stock in the newly formed C Corp.

• Funds are now working capital and available for any purpose to include leveraging against a loan.

 

Are you considering real estate investments?  Give me a call today and let's chat!  Suzy Granger 281-954-6023. 

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