Amazon, the online retail and delivery services behemoth, is making an interesting offer to current employees: Quit your job to start a delivery business. In return, the company will pay them three months’ worth of salary, plus up to $10,000 to fund business start-up costs. Does this represent an opportunity for Self-Directed IRA investors? Yes, though not in a way you might think.
But first, some background.
Why is Amazon Doing This?
The company is looking to reduce headcount as it develops technology to replace some employees, particularly in warehouse and packaging positions. Meanwhile, Amazon wants to beef up their delivery capacity, which is labor intensive, and not nearly as easily automated.
But Amazon does not want to own tens of thousands of delivery vans across the country. It has no special expertise in running local delivery services. It wants to contract that stuff out.
Which brings us to:
The company has negotiated discounts on everything from fuel to uniforms to the vans themselves. There’s no up-front cost necessary to acquire the delivery vans. Amazon has worked out a lease deal with a third party that allows entrepreneurs to acquire Amazon-branded vans at no up-front cost. You pay the lease as you earn.
According to the company, Amazon is “looking for candidates who love building and growing a team, have the grit and leadership required to roll up their sleeves to get work done, enjoy operating as a part of a larger community, and have a can-do attitude that inspires their team to handle labor-intensive delivery work.”
You do not have to be an Amazon employee to take advantage of the offer. All you need to do is show Amazon that you have the qualities they’re looking for, as well as at least $30,000 in ready capital (the company wants you to have some reserves in addition to the estimated $10,000 in startup costs.)
Many people we talk to are looking for ideas for businesses they can run within a Self-Directed IRA. As most regular readers know, a Self-Directed IRA can own an LLC, limited partnership or C-corporation, though not an S-corporation.
How to Participate Using Your Self-Directed IRA
Is the Amazon opportunity a suitable candidate for a Self-Directed IRA or SEP?
Not directly. Amazon is looking for people who want to work hands-on in their delivery businesses on a full-time basis. They warn that the opportunity is not suitable for those who want to run a part-time business or a side hustle.
Since you cannot pay yourself a salary out of a business held within your Self-Directed IRA, you would need some means of supporting yourself from outside the business while you built your Amazon delivery service from scratch.
But there are other ways to take advantage of this opportunity and others like it using a self-directed retirement account.
You could, for example, invest IRA assets in a delivery van service being started by someone else – even one of the new Amazon delivery business owners.
How? You can use your Self-Directed IRA in the following ways:
- Private lending. You can help them with startup costs at an above-market interest rate. Or stand by and help them with bridge loans and loans to cover payroll during lean times. Suggestion – keep them going until Christmas, when they will be flush with cash from the busy Christmas delivery season and able to pay you back.
- Equipment leasing. You could lease vans and other businesses to them via your Self-Directed IRA.
- Real estate. You could purchase a fleet parking lot and office and lease it to the new Amazon delivery business owner. In return, they would pay a competitive rent for the property.
- Private equity. You could buy stock in a C-corporation, or a direct interest in an LLC or partnership via your IRA. This is a riskier proposition. If the company loses value, you lose right along with it. All creditors get paid before shareholders. But you also get to participate in the company’s growth, if it is successful.
If you are planning on starting one of these businesses, you can approach anyone with a large retirement account with a proposal. If your potential investor or lender is interested, call American IRA, LLC and we can help them set up an account from which they can fund you.
Remember that there are certain prohibited transactions when you use your Self-Directed IRA for ventures such as these: Your IRA cannot invest in or lend to any business owned by your spouse, children, grandchildren, parents, grandparents or those of your spouse, for example.