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Can I fund a new business by rolling over money from an existing IRA to my new corporation's 401(k)?
Is it wise and legal to buy a small new business by rolling over money from an existng IRA account into a newly established 401(k) sponsored by my new business? The new 401(k) would buy stock in my new business (a C-Corp--or should it be an S?) and that would fund my business.

Asked by martzberg
Posted: Monday, June 16, 2008  |  Found in Finance & Accounting

More answers by Nina Kaufman
Answer by Nina Kaufman
Any time you take money out of a retirement account (for whatever purpose), you need to be sure that you won't get hit with penalties for early withdrawal. In addition, your plan to have the 401(k) plan buy the stock of your company seems overly convoluted if your company is not publicly traded and therefore does not have a market value.

The simplest solution is most often the most elegant one, and 401(k) rules as to how the plan gets established are very complex. You should definitely speak with a financial advisor or other retirement-plan specialist to make sure you don't run afoul of the rules.
Nina L. Kaufman is an award-winning business attorney, author and speaker. For more than 15 years, she has successfully navigated thousands of small businesses through the legal hurdles they face in starting and running their companies. Under her AskTheBusinessLawyer.com brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine.

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