Message Font: Serif | Sans-Serif
No. of Recommendations: 2

My franchisor sent me to talk with a company called "FranFund".

Bottom line: There is a process to achieve what I'm looking for.... for a fee and it is known as a "Rollover for business start-up". FranFund performs the service of running through these steps:

Step 1: Get incorporated...must be a C-corp.

Step 2: Form a 401k sponsored by the C-Corp. Need a third party administrator, in this case...FranFund uses Merrill Lynch as the custodian.

Step 3: I would be a participant in the 401k and rollover money (for the business) from my another IRA account(s).

Step 4: The C-corp would issue stock and this stock would be purchased within the 401k.

* There are ongoing expenses with plan administration, including filing of Form 5500.

* Have to open the 401k to all eligible employees and they can either opt in or opt out. They can be offered the opportunity to invest in mutual funds. They do not get the opportunity to buy C-corp shares.... that would open a whole can of worms and wouldn't be feasible for this small business owner.

* Looking online, it appears that FranFund hasn't been having issues doing this. Here's a short Intuit discussion:

* Article mentioning it:

* Another article: ...and there are other articles that lend credence to the idea that this is a proven approach that works if done exactly as the IRS requires.

Fee? $4695.... plus ongoing administrative fees of $95/mo

As one articles says, if you need $30k (for example).... just withdraw the money and pay the taxes. But, if you need a lot of money.... a crazy approach like this appears to be less painful than withdrawing hundreds of thousands of dollars and paying a mammoth tax bill.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.