Using Your IRA Funds To Start A Business Is Very Risky

Capitalizing your own business with your own tax-deferred retirement money has a really attractive logic to it. Based on a pretty unscientific bit of sampling on my part, most of the population is divided between people who have no net worth to speak of and people whose net worth consists almost entirely of home equity and retirement accounts. So using that retirement money as equity for a business seems really attractive. I never liked the idea myself. It always struck me that the rules surrounding retirement accounts made it just too easy to unwittingly have a “prohibited transaction”. That is what seems to have happened to Terry and Shelia Ellis who, earlier this month, heard from the Eighth Circuit.

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