If you are seeking to use your retirement funds for business financing and currently have retirement funds in various former employer plans and IRA accounts, the financing of the business can be done using solo 401k funds through a solo 401k participant loan or using the 401k business financing plan (also known as a ROBS 401k PSP Plan).
Method 1 Funding Own Business Using a Solo 401k Participant Loan
Using a Solo 401k Loan for Business Financing would allow you to borrow up to 50% of the balance (not to exceed $50,000) that you could use for business financing. This option has a lower cost and would allow you to operate the business through an LLC or S-corporation but requires repayment of the loan(s) and is designed for a business with no w-2 employees who work more than 1000 hours per year. Under this method, you (not the solo 401k) is a shareholder /owner in your business.
Method 2 Funding Own Business Using the 401k Business Financing Plan
Funding you business via our 401k Business Financing (or rollover as business startup) would allow you to invest all of the retirement funds and does not require repayment but is a higher cost and would require operating the business as a a C-corporation. Under this method, your 401k owns common stock shares in your Corporation and you are a W-2 employee, so you can draw a salary. You are not required to invest all of your 401k funds in your business and any funds not invested in the business can be invested in equities.
