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Recent News Stories from PRnetwire >> News Article

Edited by Christopher Simmons, senior news editor


Alexandria, VA -- (SEND2PRESS NEWSWIRE via PRNetwire) -- September 13, 2002 -- Small business owners can tap a source of cash that until recently was inaccessible to them without stiff tax consequences. Under new tax laws effective this year, business owners who set up a solo-owner 401(k) can borrow up to $50K from their retirement savings tax-free and penalty free.

A solo-owner 401(k) is a qualified retirement plan. Small business owners can put new contributions or transfer existing IRAs, or other qualified retirement accounts into the plan. They can borrow up to 50 percent or $50,000 from their solo-owner 401(k) plan account balance. The loan remains tax free and penalty as long as it is paid back on time, according to information on the website of Lamaute Capital, a retirement investment advisory firm in Alexandria, VA.

Any business owner with no employees other than a spouse or co-owners can establish a solo-owner 401(k) plan. This includes independent contractors with 1099 income, freelancers, sole proprietors, partnerships, Limited Liability Companies (LLCs), or corporations.

While it is common for employees of large companies to have the option to borrow from their 401(k), until this year small business owners were not allowed the same privilege. Instead, owners needing to tap their retirement funds for whatever reasons had to take cash distributions from their IRAs or other retirement accounts. This required them to pay federal and state taxes on the distributions, plus generally a 10% penalty if they were under age 59. They also lost the chance to put the money back into their retirement accounts.

"A business owner in need of cash can in essence borrow from himself by taking a loan from his solo-owner 401(k). A loan is not taxed because the payments and interest go into the retirement account", says Daniel Lamaute, CEO of Lamaute Capital. "Although, there are no restrictions on the use of the borrowed money, one should be very careful when using one's retirement 'nest egg'," says Lamaute.

Lamaute Capital, Inc. is an investment firm specializing in retirement plans. To learn more about the new Solo-Owner 401 (k) plan visit:

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