Retirement Investments Sioux Falls SD

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Mr. David D. Brandt, CFP®
(605)336-0935
622 S Minnesota Ave
Sioux Falls, SD
Mr. John D. Wenande, CFP®
(605)977-2709
200 E 10th St Ste 500
Sioux Falls, SD
Mr. Thomas E. Pruner Jr., CFP®
(605)339-1999
200 E 10th Street
Sioux Falls, SD
Mr. Thaddeus M. Barnes, CFP®
(605)338-6500
300 Cherapa Place
Sioux Falls, SD
Ms. Barb J. Vavruska, CFP®
(605)274-9156
3901 E 10th St
Sioux Falls, SD
Mr. Neil H. Graff, CFP®
(605)977-2801
200 E 10th Street, Ste 500
Sioux Falls, SD
Daniel Lynn Freese, CFP®
(605)339-8729
141 N Main Ave Ste 601
Sioux Falls, SD
Chance C. Stoeser, CFP®
(605)366-0789
3301 E 26th St Ste 111
Sioux Falls, SD
Nicholas Volin, CFP®
(605)335-1693
1509 S Minnesota Ave Ste 6
Sioux Falls, SD
Mr. James P. Volin, CFP®
(605)335-1693
1509 S Minnesota Ave Ste 203
Sioux Falls, SD
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Investing Retirement Funds in a Business or Franchise

retirement funds small business
Growing numbers of small business and franchise entrepreneurs are discovering that their retirement assets can be diversified into investments outside of the stock market. They’re finding that, through a vehicle commonly referred to as Rollover as Business Start-ups (ROBS), they are allowed to legally invest 401(k) money in their own small business without taking a taxable distribution or getting a loan. It’s estimated that in 2010, more than 4,000 individuals will become entrepreneurs by investing their existing retirement assets into a business – and in turn – will create more than 25,000 jobs.

Entrepreneurs who work with expert companies to correctly complete a private investment in their own company often cite this “investment in oneself” as especially attractive since they wholeheartedly believe in their ability to open, operate and successfully lead a business. Another reason this type of transaction is attractive to an entrepreneur is because they can invest in their business without getting a loan. This means that the new business can reinvest the initial cash flow into the business instead of sending it off to a bank in the form of interest payments. It is reasonable to assume that a business that is not servicing high interest loans has a shorter “runway” to reach profitability. Guidant Financial reports that its clients are 63% more likely to succeed than other traditional business owners.

ROBS transactions generally involve four or five steps which, although complex, can potentially be completed in less than three weeks. The process generally includes the following steps:

  1. A new business entity, a C corporation is formed on the client’s behalf
  2. The client then rolls up to 100% of their eligible retirement funds into a newly created 401(k) plan;
  3. This plan, in turn, invests in the stock of the new corporation;
  4. The corporation, now flush with funds and free of debt acquires a small business or franchise.

There are many reasons that an entrepreneur would choose to invest in their own business. Reasons may include, but are not limited to:

  • They believe a small business they own and control is the best investment for their retirement plan.
  • They receive a debt-free equity injection into the enterprise;
  • They can provide their employees (including them) with a 401(k) plan, a benefit rarely seen in American small business today

The legal requirements for establishing and operating 401(k) plans were created under the Employee and Retirement Income Security Act (ERISA), which identifies the guidelines for 401(k) plan investments. These 401(k) plans, also called pension plans, are carefully protected by the IRS and DOL, so all transactions involving them need to ultimately benefit of the plan.

ROBS transactions are increasing in popularity, especially in a financial climate unfriendly to borrowers. Yet they’re still misunderstood by far too many...

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