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Retirement Plan Rollover:

The tax-deferred, penalty-free way to fund your franchise business. 

Want to start your franchise business with debt-free, available cash? It’s possible with a rollover plan that lets you structure your retirement funds as an investment in your business.

What It Is and What Qualifies

A retirement plan rollover is a business funding option that reallocates the money you have in a current retirement plan to a new 401(k) profit sharing plan for your new corporation. Some retirement plans that qualify as an IRS-compliant way to fund your franchise business:

  • IRAs
  • 401(k), 403(b), and 457 Plans
  • Employee Stock Ownership
  • SEPs
  • Cash Balance, Money Purchase, and Defined Benefits Plans
  • SIMPLE Plans
  • Annuities (penalties may apply)

How It Works

Fulcrum Franchise Development can point you in the right direction to providers that help you complete the steps of converting your retirement funds into a retirement rollover plan for your franchise:

  1. C-Corporation is established. These plans create a new C-Corporation that will be the operating entity of your business.
  2. A profit sharing plan is created. Your retirement funds are converted into a new 401(k) profit sharing plan to accommodate your new business during its set-up phase, and support long-term growth.
  3. Funds are rolled over. Your qualifying retirement funds are rolled over, tax-deferred and penalty-free, into the new profit sharing plan—you are the plan’s trustee who directs how these funds will be invested.
  4. Cash is available. Once the new plan is in place, your new C-Corporation has the funds it needs to invest. You can use these funds for any legitimate business purposes (franchise fees, payroll, rent, etc.)

 A Saving Scenario

With a retirement plan rollover, you can direct how much to invest, all while avoiding fees and taxes when you access cash you’ll need for critical, legitimate business expenses. Without a retirement plan rollover for your franchise, you’d incur your ordinary income tax rate plus a 10% penalty from pulling cash from your current retirement plan.

For instance, if you withdrew $100,000 from your current IRA at a 25% tax rate plus a 10% penalty, you’d only have $65,000 available. A retirement plan rollover gives you access to all $100,000 to invest into your new profit sharing plan and your franchise business.

Benefits, Management, and Cash Flow

With a retirement plan rollover, your franchise employees and you as the owner can contribute to it with pre-tax dollars. Your company also has the option to make matching contributions and extra profit sharing contributions (an attractive feature to employees). You benefit as the business owner by having a way to capitalize your business and save more money for your retirement.

As the franchise owner, you act as the trustee who legally owns and manages your plan’s assets. You also act as plan administrator who is the legally responsible for your plan’s non-investment and administrative operations. Your plan’s third party administrator is the provider that manages your plan to make sure it compliantly meets all IRS and Department of Labor (DOL) requirements.

Moving your current retirement funds into a retirement plan rollover for your franchise normally takes 15–20 business days, but can be available faster, depending on the plan provider you select. Should circumstances change and you decide not to move forward with your business, there’s nothing to undo and no refunds to initiate—your money simply stays safe in an IRA.

Ready for a Rollover?

Contact the pros at Fulcrum Franchise Development—we have relationships with several funding plan providers so you can find the best retirement plan rollover for your franchise business needs.