Using your Retirement Funds to Buy a Franchise

 

Also called Rollover as Business Startups, ROBS, or 401(K)/IRA Rollover Funding

This method allows you to use your 401(k), IRA, 403(b), or other qualified retirement account to buy a franchise – with no penalties, upfront taxes, or debt. It can also be used as the capital injection required for SBA loans. 

 

How it works: This program is similar to buying stock in a public company, except instead you’re investing in your own privately held company. A leading ERISA (Employee Retirement Income Security Act) attorney named Len Fischer (the founder of Benetrends Financial), pioneered this method of funding in 1983 to help small business owners maximize the benefits of their retirement plans. Here are the 4 key steps:

 

For more details, watch this video on how it works.

ADVANTAGES:

  • Tax-deferred and penalty-free
  • Can pay yourself a salary from the start
  • No interest payments or repayment of loans
  • Can secure funding fast – typically 3-4 weeks
  • Gain cash flow and build equity faster since its debt-free funding
  • Not dependent on your credit score

DISADVANTAGES:

  • Does not make financial sense to use if haven’t accumulated more than $50,000 in retirement savings
  • Is a complex process that involves ongoing administration to stay compliant – so it’s recommended you hire an experienced provider
  • Involves an element of risk with your retirement savings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Learn More about Franchising

Franchising 101

“Owning a franchise allows you to go into business for yourself, but not by yourself.”
A franchise provides franchisees with a certain level of independence where they can operate their business.

Resources and Education

The International Franchise Association is committed to educating prospective franchisees on the dynamics of franchising and providing them with information to begin their evaluation of whether to become a franchisee. Beginning with the adoption in 1970 of the first franchise disclosure requirement in California.

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