At present, there are around one million people who start a business every year and the percentage of them that buy a franchise is quite high. The number could have been higher, if all people dreaming of starting a franchise get adequate funding. That is why new financing programs are finding more and more takers and using retirement funds like IRA and 401(k) have become quite a preferred method.
According to the Employment Retirement Income Security Act (ERISA), retirement funds that are in possession of an employer under which the candidate is no longer working can be transferred into usable capital for businesses including franchise opportunities. In order to gain that, you have to create a C – corporation at first. After that, the new corporation will make a retirement plan and the funds available to you will be rolled over to this new plan. With this money, the stocks of the C-corporation will be bought and you as the owner of the corporation can get the money to buy a franchise. The money can be utilized not only for that purpose, but for a variety of other uses such as purchasing real-estate for the franchise, paying franchise fee or other start-up costs and even for business expansion like starting a new unit.
Generally, if you take money from your retirement fund before the age of 59.5, you will be penalized and taxed. But with IRA and 401(K), you won’t have to pay penalty or tax. But you are required to be careful enough while going for this way of starting a franchise. If you are in the fag end of your career and lose the money on dubious franchise, then you may face quite an uncertain retired life. Furthermore, the C-corporation format makes the business difficult to sell and also, you are supposed to work on it yourself. Hence, even if you want to put up your franchise business for sale, you won’t be allowed to do so. On the brighter side, since you are taking loan from yourself only, if it succeeds, you will be rewarded twice fold. Therefore, try to know about it when you have gone for franchise consulting and talk with your franchise attorney and most importantly, go for renowned financial service providers like Guidant Financial Corporation.
Looking for Franchise Finance? You May Be Sitting On It Already - To learn more about this author, visit Ray Flores's Website.
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Ray Flores
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