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A Simple
Plan For A Start-Up Loan
By Daniel Lamaute
Lamaute Capital, Inc.
http://www.investsafe.com/
When seeking money for their start-up business many entrepreneurs
are using a simple plan to get a loan from their own IRA or 401(k)
assets.
Starting in 2002, new rules allowed a business owner to set-up a
Solo 401(k) and take a loan from his Solo 401(k) account. The Solo
401(k) - also called a Self-Employed 401(k) or Individual 401(k) -
is designed for the small business with no employees.
You can initially fund your Solo 401(k) that you set-up with a
mutual fund company by rolling over an existing IRA, 401(k) you left
with a previous employer, or other retirement funds into the plan.
You can borrow up to a maximum of $50,000, but not more than 50
percent of the balance in your Solo 401(k) account. By taking a loan
instead of a distribution you may also avoid the tax penalties
generally associated with early withdrawals.
A loan from a Solo 401(k) is fast to obtain because you are in
effect taking the money from your account. In many cases the 401(k)
loan interest rate is fixed at prime rate for the duration of the
loan, generally five years or more. The loan payments, interest and
principal, go back in your 401(k) account.
You can use a 401(k) loan for any purpose. However, if the loan is
not paid back on schedule the loan balance will be subject to taxes
and a possible 10% penalty.
The Solo 401(k) is available to any business that employs
only owners and their spouses, including C corporations, S
corporations, partnerships, and sole proprietors working
part-time or full-time in their business.
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Author: Daniel Lamaute
Retirement Plan Specialist at Lamaute Capital, Inc.
Lamaute Capital, Inc., an investment firm specializing in
retirement plans, operates
http://Click2Borrow.com information source for small business
owners interested in the Solo 401(k) and its loan feature.
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