Retirement Investment

In addition to the traditional stock, bond and mutual fund investments, it is possible to hold other assets, such as a franchise, as an investment of a retirement account. There are self-dealing rules associated with these types of non-traditional investments. An experienced retirement account facilitator can help structure a franchise purchase as an investment of retirement funds.

The advantages of investing retirement funds directly into a franchise, rather than taking a distribution or a loan are:

Reduced Overhead: A loan generally requires some form of monthly payment. By investing retirement funds into a franchise, franchisees can avoid borrowing at least a portion of the funds needed to purchase and operate the franchise. This frees up additional cash flow during the early stages of the business to reinvest into marketing, inventory or additional staff.

Tax-Deferred Savings: If franchisees take a distribution of retirement funds in order to purchase a franchise, they will be subject to taxes and penalties. Investing retirement funds into a franchise not only keeps those funds in a tax-deferred account, but also provides a vehicle for franchisees to continue putting money away for retirement.

Furthermore, when distributions of profits are made, or when the franchise sells, the retirement account will receive a portion of the proceeds as an owner of the franchise.

In order for franchisees to invest their retirement funds in a franchise, there are certain requirements for the business entity and retirement account structure. It is important to use an experienced attorney or retirement account facilitator to properly set up this structure.