Investing in Franchises with your Retirement Plan

When businesses go big, they go everywhere. Restaurants, retail, and other consumer goods and service providers often support their expansion strategy through franchising. Capital efficient for entrepreneurs and owners, franchises are also popular with consumers who trust the brand. Franchising could become even more popular soon, as with the opening up of the economy brick and mortar businesses could see substantial new foot traffic. 

Ready to buy a business with your retirement plan? Click here to get started today! 

Buying a Franchise 

Investing in a franchise enables you to become a business owner with all the support of an existing brand, coupled with startup best practices to help you launch and grow. In return you are often required to make an upfront five- or six-figure financial commitment. While this is a significant sum, you may already have a source of readily investable cash: your retirement account.  

Unknown to most investors, retirement and health savings accounts are surprisingly flexible investment accounts. In addition to stocks, bonds, mutual funds and ETFs, your IRA, Solo 401(k), or Health Savings Account can also invest in real estate, private equity, and yes, even purchase its own franchise.  

If you decide to invest in a franchise opportunity with your IRA, however, there are a few rules to keep in mind. For starters, the IRS prohibits you from receiving any compensation personally from the business. Secondly, the IRA-holder cannot be involved with day-to-day operations. In essence, the IRA-funded investment would need to be a passive asset. 

Investing with a Retirement Plan 

While most custodians do not allow franchise investments, New Direction Trust Company specializes in alternative assets such as franchise investments, providing the freedom to invest in businesses you see promise in. To get started you can easily transfer an existing retirement balance to your new self-directed plan.  

From there, you’re in the driver’s seat. You evaluate investment opportunities, including franchise businesses, and add to your retirement portfolio as opportunities present.  

Retaining Your Tax Advantages

Shifting your retirement strategy away from Wall Street doesn’t mean you sacrifice the considerable tax benefits of your plan. Earnings produced by an account-owned investment, such as a franchise investment, belong to the account. Similarly, account owners cannot simply deposit earnings into a personal bank account. This separation can serve you well as retirement accounts are not subject to annual capital gains or income taxes.  

Reach Out with your Questions 

Owning a business or investing in other assets with a self-directed account is easier than you may think. When ready New Direction Trust Company is here to help you get started! 

Give us a call at 877-742-1270 or send us a message through the Client Portal and let us know what we can do for you. 

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