Guidant Financial Group Blog

Can IRA funds be used to start a business? Or do you have to purchase an already existing business? I am looking to start a consulting business.

-- Tom (Worcester, Mass.)

You can absolutely launch your own business with IRA funds! Guidant’s 401(k) small business financing solution can be used to start a new business or franchise, or it can be used to purchase an existing business or franchise - as long as the business is a legitimate operating company.

An operating company is a business that is engaged in the sale or exchange of a product or service. We’re often asked if one can “invest” as a business. The answer is generally no. The investment of capital is money paid to purchase a capital asset or fixed asset. Therefore, if you were to start or purchase a business that did not engage in transactions with third parties (i.e., holding a piece of property for appreciation long-term), or that invested capital as its main business activity (i.e., a lending institution or bank), the business would not qualify as an operating company and thus could not us our 401(k) small business financing solution.

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