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Can I fund a new business by rolling over money from an existing IRA to my new corporation's 401(k)?

Is it wise and legal to buy a small new business by rolling over money from an existng IRA account into a newly established 401(k) sponsored by my new business? The new 401(k) would buy stock in my new business (a C-Corp--or should it be an S?) and that would fund my business.
Nina Kaufman answered June 16, 2008
URL: http://www.entrepreneur.com/answer/221455
Any time you take money out of a retirement account (for whatever purpose), you need to be sure that you won’t get hit with penalties for early withdrawal. In addition, your plan to have the 401(k) plan buy the stock of your company seems overly convoluted if your company is not publicly traded and therefore does not have a market value.

The simplest solution is most often the most elegant one, and 401(k) rules as to how the plan gets established are very complex. You should definitely speak with a financial advisor or other retirement-plan specialist to make sure you don’t run afoul of the rules.

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.