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.