The Business Acquisition Solution, also known as Rollover Business Startup (ROBS), uses funds from eligible retirement accounts, like 401(k) or IRA, to invest in an existing or a new business or franchise without tax or penalty.
The legality of the ROBS structure is based on an exception to the prohibited transaction rules under Internal revenue Code Section 4975(d)(13) which allows a 401(k) plan to buy corporate stock. There are 4 steps to establishing an IRS compliant ROBS solution:
The ROBS solution is the only legal solution that allows one to invest more than $50,000 of retirement funds into a business they will personally be involved in and work in without triggering the prohibited transaction rules.
Next, you’ll find a short overview of what IRA Financial Group’s Business Acquisition Solution offers. You can also check out our learn more pages for in-depth information.
With our Business Acquisition Solution to ROBS, you can access your retirement funds to start or grow a business tax free and without penalty. Note that accessing your retirement funds can prove expensive if not structured properly.
To be eligible to participate in the corporation 401(k) plan, you must become a W-2 employee of the C Corporation. For many entrepreneurs, earning a salary and being actively involved in the business is why they use a ROBS instead of a Self-Directed IRA.
This plan allows the holder to invest their retirement funds in a business that will be actively run by the retirement account holder. This means you can essentially invest your retirement funds on yourself.
Prior to the 2017 tax plan, using a C Corporation for a small business was considered tax inefficient because of the 35% maximum corporate tax rate. The plan lowered the corporate tax rate to 21%, which has contributed to the re-emergence of the C Corporation as a popular business entity choice.
Retirement accounts have become many Americans’ most valuable assets. As such, it’s vital that you have the ability to protect them from creditors, such as people who have won lawsuits against you.
With most businesses offering their employees retirement benefits, it is worthwhile for small businesses to compete for talented workers by implementing 401(k) benefits. Offering 401(k) plan benefits is a great way to retain key employees.
Don’t know which plan you qualify for? Have questions about a transaction? Our tax professionals are here to help and will get back to you ASAP.
We’ll take care of everything. We’ve helped over 12,000 clients open self-directed retirement accounts over the last 10 years. The whole process can be handled by phone, email, fax, or mail. Our expert tax and ERISA retirement professionals are on-site, greatly reducing the set-up time and cost.
Call us at 800-472-0646 to get started; we’ll help you get a self-directed retirement structure started within minutes.
We have a ton of resources that will help answer all your questions. We understand the importance of education when it comes to retirement, and we want to make sure you’re confident about every decision you make.
We know there’s a lot of information out there; these terms will help you sort through the different types of plans.
LLC stands for Limited Liability Company and has rapidly become one of the most popular business entity types for new and small businesses, largely because it is considered to be simpler and more flexible than a corporation. The LLC business structure combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
LLCs, like corporations, are recognized as separate legal entities, meaning its members are protected from company debts, obligations, and liabilities. In the self-directed IRA LLC context, the LLC owner would be the IRA and the manager would be you, the IRA owner.
A SEP is a retirement savings plan established by employers, including self-employed individuals (independent contractors- sole proprietorships or partnerships) for the benefit of their employees.
Employers may make tax-deductible contributions on behalf of eligible employees – including the business owner – to their SEP IRAs. The maximum SEP IRA contribution amount is 25% (20% if you are self-employed or a single member LLC) of an employee’s compensation. The SEP IRA follows the same distribution rules as a traditional IRA.
A SIMPLE IRA (Savings Incentive Match Plan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is suited for a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.
Any employer (including self-employed individuals, tax-exempt organizations, and governmental entities) that had no more than a hundred employees with $5,000 or more in compensation during the preceding calendar year can establish a SIMPLE IRA plan. The plan allows eligible employees to contribute part of their pretax compensation to the plan.
A Roth IRA is an individual retirement account that offers tax-free growth and withdrawals in retirement. The rules dictate that as long as you’ve owned your account for 5 years and you’re 59½ or older, you can withdraw your money when you want to and you won’t owe any federal taxes. With a Roth IRA, there are no required minimum distributions (RMDs) for as long as you live. In addition, contributions to a Roth IRA are not required to stop when you reach 70½, the cut-off age for a traditional IRA.
However, contributions may be limited by how much you earn—your modified adjusted gross income (MAGI) must be less than the annual limit set by the IRS.