Use Your 401k to Buy a Business – Annual Appraisal Requirement

If you use a 401k small business financing strategy to fund your new franchise or other small business start-up, your business will need to sponsor a 401k profit sharing plan. In order to maintain the compliance of the plan the value of the plan assets (including the value of the company stock held in the 401k) will need to be reported each year. The “best practice” is to obtain an annual appraisal from an independent third party (e.g., a tax professional, CPA, etc.). Moreover, it will be essential to obtain a formal appraisal from an independent professional for certain transactions such as the purchase of additional shares, liquidation of shares, etc.

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