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The Rollover Business StartUp (ROBS) Solution Explained

The Rollover Business Startup Solution (“ROBS”) is the only legal way one can use retirement funds to invest in a business in which they or any disqualified person is directly or indirectly personally involved with.

Rollover Business Startup - ROBS - Legal
Rollover Business Startup – ROBS – Legal

The ROBS solution typically involves the following sequential steps: (i) an entrepreneur or existing business owner establishes a new C Corporation; (ii) the C Corporation adopts a prototype 401(k) plan that specifically permits plan participants to direct the investment of their plan accounts into a selection of investment options, including employer stock, also known as “qualifying employer securities.”; (iii) the entrepreneur elects to participate in the new 401(k) plan and, as permitted by the plan, directs a rollover or trustee-to-trustee transfer of retirement funds from another qualified retirement plan into the newly adopted 401(k) plan; (iv) the entrepreneur then directs the investment of his or her 401(k) plan account to purchase the C Corporation’s newly issued stock at fair market value (i.e., the amount that the entrepreneur wishes to invest in the new business); and finally (v) the C Corporation utilizes the proceeds from the sale of stock to purchase an existing business or to begin a new venture.

With the IRS compliant Rollover Business Startup Solution, you can earn a reasonable salary from your new business or franchise. You can also use your new 401(k) Plan to make high tax-deductible contributions – $53,000 ($59,000 if you are over the age of 50) and even borrow up to $50,000 for any purpose.

For additional information on the rollover business startup solution, please contact a retirement tax specialist at 800-472-0646.

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Posted in Business Acquisition Solution