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Can a 401K or an IRA account be used to start a business and aviod paying the tax or early withdrawl penalties


This is to acquire franchise rights and build out a location.

The only legal method I can think of is the Self Directed Roth IRA will allow you to start for example a Real Estate venture all money in vested and profits made run thru the Roth tax free.

Also if you do don't have enough money in you Roth to start you can find partners with a Roth and buy the real estate jointly/partnership (partner 1 owns 50%, partner 2 owns 50%)
the expenses are then split as well as the profits by the number of partners.

go to google and search "real estate IRA" will list many companies. www.pensco.com has an e-book you can download Source(s): www.pensco.com
you can use it but you will pay taxes and penalties. but you will also have new deductions so it may even out. talk to your accountant.
I'm no Finance expert, but I would surely think not since both are personal retirement accounts. I think the only early withdrawals permitted without penalty are to pay child's education, purchase 'first house' and if you can prove a fincial hardship.
If the provisions of the plan allow it, you can take a loan without the horrendous penalties that come with early withdrawals. However, you are then banking your retirement money on a business venture. If the business fails you will still have to pay back the plan and you will have lost the tax-free growth in the plan in the meantime (because the money you use to pay back the principal borrowed from the plan will come from income that is taxed).

This sort of borrowing is really a last resort. If this is your only means of raising capital at a decent interest rate I would urge you to think if this venture is a good idea in the first place.

Have you tried the Small Business Administration? You can get loans from them through your bank, so speak to them and see what they can come up with. A business plan will help, so you might want to engage a CPA.

Good luck with whatever you decide to do.
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