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Hello and thank you for your question.
If you are trying to complete a rollover, then there are cheaper ways to do it.
If you are trying to establish a new plan for your business, then rollover into that (not sure why you'd want to...), then that may cost more depending on your business, etc.
If you are trying to take money out of your 401(k) early to use in a business, then you'll likely be subject to a penalty in addition to any regular income tax due. Any company that claims otherwise is going to get very aggressive and have a very complicated setup trying to avoid the early withdrawal...
I'll be happy to clarify further. Thank you again for your question!
In doing so, they are trying to 'skirt' (my words) the prohibited transaction rules set forth by IRC 4975 and any related additional taxes:
(c) Prohibited transaction
(1) General rule For purposes of this section, the term "prohibited transaction" means any direct or indirect-
(A) sale or exchange, or leasing, of any property between a plan and a disqualified person;
(B) lending of money or other extension of credit between a plan and a disqualified person;
(C) furnishing of goods, services, or facilities between a plan and a disqualified person;
(D) transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan;
(E) act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interests or for his own account; or
(F) receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.
Note the penalties:
(a) Initial taxes on disqualified person There is hereby imposed a tax on each prohibited transaction. The rate of tax shall be equal to 15 percent of the amount involved with respect to the prohibited transaction for each year (or part thereof) in the taxable period. The tax imposed by this subsection shall be paid by any disqualified person who participates in the prohibited transaction (other than a fiduciary acting only as such).
(b) Additional taxes on disqualified person In any case in which an initial tax is imposed by subsection (a) on a prohibited transaction and the transaction is not corrected within the taxable period, there is hereby imposed a tax equal to 100 percent of the amount involved. The tax imposed by this subsection shall be paid by any disqualified person who participated in the prohibited transaction (other than a fiduciary acting only as such).
If you feel you find a set up that avoids breaking the prohibited transactions rules either directly or through the exemptions in 4975(d) (or you trust 'them'), and you feel Congress won't look to eliminate any loopholes potentially exposing your business and yourself, then you may be ready for this sort of set up. I personally choose to not suggest this, due the additional complications for set up and operations, as well as the potential for tax avoidance (for $5,000, you might as well just pay the tax on your pension withdrawal perhaps too...). What makes you think a simple LLC or S-Corp wouldn't be the best organizational structure, other than wanting to withdraw early from a retirement account? Don't forget to weigh in the benefits of other opportunities and include them with your costs of this set up...
Sorry if this is not what you want to hear. I am playing devil's advocate some. I do understand that it would be nice to use pension money to start a business. I also understand that allowing 'withdrawals' from pensions tax and penalty free allows taxpayers the ability to choose when and/or if they pay income taxes...
Thank you again for your question and good luck!