Finance your business with the ROBS Solution rather than taking out a high-interest loan and incurring debt. By utilizing the ROBS Solution, you tap into your retirement funds to be used as capital, free of tax and penalty.
Learn the requirements for establishing the ROBS structure.
- The ROBS Solution lets business owners use retirement funds to fund their own business penalty-free.
- The benefit is, you don’t have to seek outside capital or debt.
- There are only three simple requirements to establishing the ROBS solution.
What is the ROBS Solution?
Did you know you can finance your existing business with the ROBS Solution?
The Rollover Business Startup (ROBS) solution is an IRS approved strategy that takes advantage of an exception to the prohibited transaction rules under Internal Revenue Code Section 4975(d)(13) to allow a 401(k) qualified retirement plan to buy C Corporation stock (“Qualifying Employer Securities”).
The ROBS solution is the only IRS approved way one can use retirement funds to invest or fund a business they will personally be involved in. Although a self-directed IRA allows one to make passive investments with retirement funds it does not permit one to use IRA funds to invest in any business that the IRA holder or any disqualified person will personally be involved in directly or indirectly.
3 Requirements to Establish ROBS
In order to establish a ROBS solution, there are three main requirements:
- There needs to be a U.S. based business.
- The U.S. business needs to be established as a C Corporation.
- The C Corporation must establish a 401(k) plan.
Only a U.S. business can establish a 401(k) plan. The reason a C Corporation and a 401(k) plan must be used and not an LLC or an IRA, is that pursuant to IRC 4975(d)(13), a 401(k) plan must purchase “qualifying employer securities” or C Corporation stock in order to satisfy the exception to the prohibited transaction rules under IRC 4975(d)(13).
The advantages of using a ROBS solution to finance an existing business is that you can use IRA rollover or 401(k) funds to finance an existing business without seeking outside capital or debt.
In addition, establishing a 401(k) plan for your business will allow you to make high tax-deductible contributions – $58,000 ($64,500 if you are at least age 50) for 2021 and even borrow up to $50,000 for any purpose. Moreover, below are some great reasons to establish a 401(k) plan for your business, in addition to using the ROBS solution:
Advantages of Establishing a 401(k) Plan:
- Up to a $5000 Tax Credit!
- Current tax deduction for business owner
- Shelter earnings from tax
- Grow assets through the power of tax deferral
- Asset and creditor protection
- Retain key employees
- Help employees save for retirement