Is this a new concept? Why don't more people know about this?
This is not a new concept. For years, private companies have been able to utilize retirement funds as a source of business capital. Most financial advisors and stock brokers, however, are not made aware of these investment options because these investments do not provide a sufficient profit for the institutions they work for. Investment firms and stock brokerages do not want clients to move their funds outside of their companies where they would no longer be able to draw a percentage of your income.
Not at all. The Employee Retirement Income Security Act of 1974 (otherwise known as ERISA) essentially passed the responsibility of retirement saving from the employer to the employee. This is a specific exception that makes the Employee Stock Ownership Plans (ESOP) of industry giants like Johnson & Johnson and Anheuser Busch possible. Similarly, the Audeo™ program was built to enable small, private companies to utilize retirement funds as a source of business capital.
Why is this becoming more popular now?
The baby boomer generation has been forced to consider investment alternatives like Audeo™ because they have had sufficient time to accumulate greater assets in their retirement accounts, and the stock market’s volatility makes security investments seem less than secure. During the past 10 years, the Audeo™ process has gained significant consumer and professional acceptance and will continue its exceptional growth as more and more individuals look to take their retirement investments into their own hands.
Can I pay myself a salary?
Yes. In fact, as part of this process you will need to be an employee of your new business, providing a bona fide service; this not only gives you the ability to draw a salary, but actually requires you to do so.
What is the maximum salary I can draw?
As an employee of your company you are entitled to draw a fair and equitable wage. Your compensation must be "reasonable" and you are strongly encouraged to employ an HR firm to conduct a salary survey or to utilize one of the salary evaluation sites available online.
What type of business can I purchase?
Almost any legal business or franchise, whether you are starting something new or buying an existing business, can be purchased through the Audeo™ program. A few restrictions exist that prohibit using the Audeo™ program for a business that is deemed to be “solely the investment of capital” (such as creating a business where you would be loaning out your retirement funds to others).
What kind of corporation do I have to use?
The Audeo™ program utilizes a C Corporation (C Corp.) business structure to meet the compliance requirements of ERISA and Internal Revenue code. A Limited Liability Company (LLC), Partnership or S Corporation (S Corp) would not meet the statutory requirements necessary to operate this structure.
What about double-taxation (for the C Corp)?
The term "double taxation" refers to taxation that occurs on dividends paid by the C Corporation. Many times these taxes can either be avoided or mitigated through the use of a qualified tax professional. Paying taxes when you take a distribution from your retirement plan can never be legally avoided.
Do I have to offer the 401(k) to all employees?
Any employee that meets all of the eligibility guidelines for the 401(k) plan must have the option to participate in the plan. For information on Guidant's participation guidelines, contact our office.
Why should I utilize the Audeo™ program versus a traditional bank loan?
By utilizing your retirement funds as seed capital for your business investment you effectively avoid all debts, fees and interest payments associated with taking out a loan. This strategy greatly reduces your overhead, which can prove invaluable in the early stages of a business venture. Instead of sending money to a bank in the form of interest payments, that money can be reinvested in marketing, promotions, staff or equipment that will enable your business to grow even faster.
How much of my IRA can I use for my business venture?
In most cases, your entire IRA can be rolled into your new business venture.
When do I have to pay my IRA back? Is this a loan?
The involvement of your IRA funds is not a loan, but an investment into your own business; thus, there is no time requirement for the plan to recapture its investment. Typically, the return of investment is done through a stock buy-back from the 401(k) by the corporation or upon the sale of the business.
Can I use this with any business and can I invest in securities as well?
Almost all businesses can work with the Audeo™ program. Some businesses that receive a significant portion of their income from lending or investing capital may not meet the program requirements. Please contact us directly if you believe your business venture would be considered "lending or investing capital" for further clarification.
Do I have to get an appraisal if I am buying a business?
If you are starting a brand new business or franchise, or buying a business on an arms' length basis from an informed and uncompromised third party, you probably will not be required to get an appraisal. If you are purchasing an existing business, it is prudent, with or without retirement funds, to get an appraisal. If you are using the Audeo™ to recapitalize an existing business that you own, you will need to get a business appraisal.
Can my spouse or another close family member co-invest, work for the business, or otherwise be involved?
Yes; the exemption to “prohibited transactions” permits participation by any friends or family members.
What are the maximum contributions that I can make per year to this new 401(k)?
For the 2007 tax year, the maximum contribution that you can make to your new 401(k) is $15,500. If you are over the age of 50, you may also contribute a “catch-up” contribution of up to an additional $5,000.
Can I still use part of my retirement money to invest in your other product (the Auriga™)?
Absolutely; many of our clients diversify their retirement plan’s holdings into many investments such as real estate, loans and tax liens.
