Your Retirement Dollars Could be the Key to your Dream of Business Ownership

middle aged man and woman sitting close together smiling with womans arm around man

The stock market has had its ups and downs. Many people are expecting that at some point soon there will be a correction in the market. Are you seeking other alternatives to invest your retirement savings? Are you burned out from corporate life? Did you know that tax deferred retirement accounts can be invested in your own business? This could be your opportunity to be your own boss. Learn how your retirement savings could be the key to your future as a business owner.

Many corporate executives have no real work/life balance dedicating 60 to 80 hours per week to their corporate job. This takes them away from quality family time and the opportunity to pursue their true passions. This is causing corporate refugees to consider a sounder option of investing in themselves and becoming empowered as an entrepreneur. Individuals with 15 to 20 years in corporate America have money tied up in employer plans, old 401K plans or IRA Rollovers. People are uninformed believing that retirement assets are untouchable. However, the IRS, DOL and ERISA allow you to invest in your own business using retirement dollars as your seed capital without penalty and tax deferred. You can choose a path of franchise ownership, startup or buying an existing business.

This program is well known for franchise startup and is called the DreamSpark plan. The DreamSpark plan is a qualified retirement plan that will allow for investment in your own business. This type of plan allows tax-deferred assets to be rolled over from a 401K or IRA accounts and invested in your business through a new qualified retirement plan. The DreamSpark becomes a shareholder in your new company. An initial valuation of the business occurs based on the amount of equity invested in the business and the retirement dollars invested becomes working capital in the business. That corporation can pay the franchise fee, rent, w-2 wages and any other legitimate business expense. Essentially, instead of investing in Amazon or any other publicly traded company your retirement account is now invested in your business. The success of your business will determine if your investment appreciates or depreciates.

Below is a graphical illustration of how it works from our team of experts at Pango Financial.

The DreamSpark plan offers some key benefits. It allows you to capitalize a business quickly in just a couple of weeks. You can reduce or eliminate the need for business debt. This can lead to quicker profitability. You can also use the DreamSpark plan to make your own payment or equity injection for an SBA 7(a) loan. The DreamSpark plan is also a retirement plan that allows you to continue to save for retirement and reward loyal employees with the ability to save as well. The DreamSpark plan can be designed as a Profit Sharing or 401K plan. The funds in the plan are tax deferred and penalty free and any new contributions made by the business to the plan are deductible.

It is important to select the right business for you and your family. Investing retirement dollars in the wrong business can cost you market returns and loss of your investment. When going into business you must recognize that risk accompanies any kind of investing, but ultimately entrepreneurs prefer to be on themselves. You have direct control of your return on investment and the growth of your retirement account.

The DreamSpark plan may not be right for everyone but it does provide a unique option that you can pursue to start your own business. Because of its complexity and specialized IRS pre-approved plan document, it is essential that you engage a professional third party administrator like Pango Financial to setup and maintain your DreamSpark plan. Long term compliance is key to maintaining your retirement dollars invested as tax deferred and penalty free.