I have seen some companies advertising a service about funding your business through a 401k has anyone tried doing that or has any experience in that field?

I have seen this advertised on other sites that sell businesses but it doesn't make much sense to me because you generally have a 10% penalty if you withdraw from your 401k before 59 1/2 so I do not know how they get around that. I would think there are better sources of funding than your retirement because you cannot put that money back in.

One way to avoid the penalty is to take a loan against your account in the 401k plan if your plan allows for it you are suppose to pay it back.

I agree with Triton I would avoid tapping into your 401k for your business. Not only do you pay a penalty you cannot replenish that amount that would grow tax deferred if you take it out. You are far better off going to family and friends.

We were looking at this option and decided not to go through with it because we thought it was too risky what if the IRS disqualified the transaction? Below is a link to a company that helps you with the transaction but I would proceed with caution:SDCooper Company - Sophisticated Benefit Plan Design

Thanks for your comments. I do not think we will mover forward with that option I was concerned about it for the reasons mentioned in the posts and now you have confirmed my concerns. We will look to alternative resources. Thanks again.