Personal Tax Considerations - self funded searcher

May 05, 2017

by a searcher from Harvard University - Harvard Business School in 1970 Walton Dr, Burlington, WA 98233, USA

I'm in the process of closing on a self funded search and have a few questions about treatment often expenses incurred to date and whether I can use my contributions to a SEP to fund my equity commitment without incurring penalties.

Anyone have thoughts or know of an accountant who is well versed in self funded search fund tax strategies? I have a great accountant for the deal work but am looking for some specialized advice.

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Reply by a professional
from Concordia College, Moorhead in 7500 Flying Cloud Dr #800, Eden Prairie, MN 55344, USA

A SEP account can be used for investments in certain business types, including an LLC. While the SEP can provide access to capital for your self-funded search, this approach comes with retirement plan-related complexities, including custodial responsibilities as well as annual income tax and valuation reporting. The administration and cost of these matters can vary based on each searcher’s situation and should be weighed against the benefits of access to capital. I’d be happy to connect with you to discuss this topic and to refer you to a member benefits consulting team who can provide detailed answers based on your specific situation.

Reply by a searcher
from Harvard University in 1970 Walton Dr, Burlington, WA 98233, USA

Thanks Ronald - I nearly went with a Solo 401(k) with Ubiquity as third party administrator and Charles Schwab as custodian. The plan was to roll my SEP into a self-directed 401k and direct the 401k assets to purchase units in the Newco LLC. Short version is, senior lender balked and said that their risk department wouldn't approve it, so it didn't happen. I'd say that if you want to use SEP or Solo 401k proceeds, make sure that you have a willing TPA and custodian, and be ready for your senior lender, attorney, or other to say "no dice" to the arrangement.

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