Taking Loans from Owner Only Business 401K

I have been thinking of setting up a 401K plan for my mechanic shop in Ohio. This is currently an owner only business but I may employ more people later. Can I take a loan from this plan if I want to expand my business? Carl Travers

Definitely, Carl! You can take a loan from your 401K plan once you set one up for your owner only mechanic shop. If at a later date you have more employees on your rolls, you can make the plan available to them. They too can use this plan as a financial safety net when they are in need of money.

If you want to expand your business, the 401K loan is a much better option than a self employed loan or a small business loan. You can withdraw up to half of your accumulated balance in the form of a loan. The maximum limit for such loans is a whopping $50,000, which is quite a substantial chunk of money for any small business. Best part is your loan is tax free. But make sure you pay back the loan on time to avoid penalties.

Managing your 401K account may be a simple task right now when you are the only participant, but it can get somewhat complex as you hire more employees. You may want to use a DIY 401K set up suite like http://low-cost-401k.com/ to ensure that managing the plan is easy and quick even when there are several participants other than you.