Professional Business Brokers a Business With Your Retirement Plan
By Ron L. Skitowski, Business Intermediary
Professional Business Brokers, Inc.
888-287-7763 Ext 203
Is it possible to purchase a business or franchise using your retirement funds without taking a taxable distribution or penalty? Of course! And it’s more common than you think! Each year, thousands of people invest their IRA or 401(k) funds into their own businesses. By using retirement funds, new business owners start with actual equity, as opposed to debt. Making the initial investment with money they already had, allows money the business generates to be reinvested back into the business. Sounds perfect, right?
The IRA and 401(k) was created in 1974 when congress passed the Employee Retirement Income Security Act (ERISA) The IRA and 401(k) transferred the responsibility of retirement investing from the employer to the employee. The strategy of using these funds to purchase a business or fund an existing business is perfectly legal and has been since ERISA passed in 1974.
Whether you’re interested in a small or even larger venture, the funds can be used to purchase a relatively small business or used as a down payment on a larger venture, backed with SBA (Small Business Administration) financing. Many Americans are faced with unsecured job security or loss of benefits in today’s world. Why not take these funds a reinvest them in a business you enjoy and have the comfort a being self employed, while increasing your annual income at the same time. In the past, I’ve seen many transactions where people used these available funds to make their dreams a reality.
The key is education. You need to know how the process works. Retirement Account Facilitators (RAFs) help structure the specific retirement accounts that enable investment into private business. A select few business brokers and their strategic alliances are educated in the processes. Your business broker should also be able to find you the right business, with a proven profitability, giving you a substantial RIO (Return on Investment). This move could change your life for years to come.
It all makes perfect sense. Why continue to fund these accounts in a volatile market where hundreds of thousands of dollars could be lost in the performance of the market? Additionally, the rules surrounding these plans are very complex and can change at any time, i.e. the age where you are allowed to use these funds. The main reasons for using the retirement accounts for financing include the added advantages of less business debt and greater long-term potential for retirement funding. By using retirement funds instead of traditional business or home equity loans, business owners can avoid costly debt service.
Using your retirement fun also enables more money to be reinvested into the business instead of sending cash to a bank each month in the form of interest payments. In addition, because the retirement account owns a portion of the business, some of the profits from the business can be returned to the retirement account, tax-deferred.
If you are looking at investing in a business venture, no matter how large or small, your retirement account just might be the answer. Contact an educated and professional business broker to understand the benefits and risks involved when investing retirement funds into a business or franchise acquisition. They can walk you through the whole process and take the stress and confusion out of the equation.
Ron Skitowski, Business Intermediary, has been with Professional Business Brokers, Inc. for the past two years. Since January of 2007, Mr. Skitowski has accumulated $2.46 Million in business sales and was awarded The Million Dollar Award from the Business Brokers of Florida organization. Prior to working for PBBI, he served as a financial planner for 6 years and holds a Series 6 securities license. You can contact Ron Skitowski at RSkitowski@pbbi.com or at (888) 287-7763.
