If they send you a check and you take the money, that counts as a withdrawal and you will pay income tax and the early withdrawal penalty.
You can set up a private IRA at most banks plus several online discount brokers. If your employer will wait, you should set up the IRA first and then have the 401(k) do a direct transfer into your IRA. That way you keep the tax savings and the investment will continue to grow. (If you feel rushed, you can always take your time later and open another new IRA that you like better and then transfer from one to the other.)
If you get a check, you can put it in an IRA within 60 days. Make sure you tell the IRA that this is a rollover, not a regular contribution. If the 401(k) withholds part of the distribution for tax, you must put the entire amount into the IRA, but you will get the tax back as part of your refund. (That's why a direct transfer is better than a rollover.)
