401k Business Funding FAQs

What type of business can I start with the 401k SelfStarter Plan?
Almost any type. The 401k SelfStarter Plan is a very flexible small business financing strategy. The type of business you can start with the 401k SelfStarter Plan is virtually unlimited. As long as the business is active and not exclusively engaged in the investment or lending of capital, your business should qualify for the 401k SelfStarter Plan.
Why am I required to use a C-Corporation?
We have designed the 401k SelfStarter Plan to ensure it satisfies applicable legal requirements. The 401k SelfStarter Plan requires the use of a C-Corporation in order to comply with Federal pension law. The use of an S-Corporation, LLC or another entity type other than a C-Corp would not meet the legal requirements.
Can I receive a salary from my new business?
Yes. You are required to be an employee of your new business that is financed with the 401k SelfStarter Plan. While you are not legally required to take a salary you may take a reasonable salary once the business generates revenue.

Will you hold the rollover funds?

No. To ensure that your business is financed as fast as possible we will fully assist you with the rollover of your retirement funds through the 401k SelfStarter Plan. However, we will never hold your money.

Can I use my 401k, IRA or other retirement funds to buy or start a business or franchise?
We are often asked if 401k, IRA or other retirement funds can be used to buy or start a business or franchise.
The great news is that you can! While one option is to take a loan from your retirement account, there is another option (often called a rollover as business startup) that is more flexible and offers many benefits over a loan in providing funding to your franchise or small business startup.Read more>>

How can I rollover my IRA funds to the 401k SelfStarter Plan?
As long as you are rolling over funds from an eligible IRA (only Roth IRA funds are not eligible), there are two ways to move IRA funds to a ROBS 401k business financing vehicle.
Option 1: Via a Direct Rollover:
When funds are directly rolled over from IRAs to a 401k for business financing, the check is made payable in the name of the 401k or directly deposited electronically into the 401k account. This is the preferred method of moving funds from an IRA to a 401k because it is reported by the releasing financial institution holding the IRA funds on Form 1099-R using a code “G” in box 7 that communicates to the IRS the IRA funds were directly deposited into a 401k. Read more>>

Is the 401k SelfStarter Plan different than a ROBS transaction?

I have read about Rollover as Business Startup or ROBS transactions. Is the 401k SelfStarter Plan different than a ROBS transaction?

No. The 401k SelfStarter Plan is what the IRS refers to as a Rollover as Business Startup. To learn more about what the Internal Revenue Service has said ROBS 401k transactions, click here.

What are the advantages using a ROBS plan to finance my business as compared to traditional small business financing options?

Most aspiring or existing business owners looking for financing for their business consider just two options: borrow funds or sell an ownership stake in their business. Another option that may be available is referred to as a rollover as business startup (ROBS) plan that allows the entrepreneur to use his or her 401k, IRA or other retirement funds to finance the business.

There are several important differences between ROBS and traditional small business financing options:

If I use my retirement funds (e.g., 401k, IRA, etc.) to start or finance my business via a rollover as business startup (ROBS), can the business obtain a loan?

While the financing of a business via a ROBS transaction does not generally prohibit the business from obtaining a loan or other type of financing (e.g., SBA loan, seller financing, franchise financing, factoring, etc.), the business should consider the following: Read more>>

Does My Solo 401k pay referral fees to franchise promoters?

While many companies pay significant (and often undisclosed) referral fees to franchise promoters or other business brokers, My Solo 401k Financial’s policy is not to pay referral fees in connection with the 401k small business financing retirement arrangement (401kSelfStarter). Not only is the payment of referral fees questionable from an ethical and legal perspective, it Read more>>

Can I buyout the 401ks ownership interest in my business?

After you finance your business via a rollover as business startup (ROBS), your 401k will hold stock in your company. Under the Department of Labor’s prohibited transaction rules, you will be prohibited from simply purchasing the stock form your 401k. Read more>>

How long does the process take?

While the required time will vary, the 401k business financing process generally takes 2-3 weeks. Typically, the biggest source of any delay will be on the part of your current retirement account provider in rolling over your retirement funds to your new 401k account. Read more>>

Do I have to make salary contributions to my 401k profit sharing plan?

If you use a ROBS business financing strategy to fund your franchise or other small business, your company will have a 401k. You should defer at least 1% of your salary into the 401k and may defer up to the federal maximums. Read more>>

Can my employees participate in the company's 401k

If you use a 401k business funding strategy to fund your existing franchise or other small business, your company will need to adopt a 401k. Any other full-time employees must be given an opportunity to participate in the plan including rolling over retirement funds into the 401k, and if they elect to do so, Read more>>

Do I need to obtain an annual appraisal of my business?

If you use a 401k small business financing strategy to fund your new franchise or other small business start-up, your business will need to sponsor a 401k profit sharing plan. In order to maintain the compliance of the plan the value of the plan assets (including the value of the company stock held in the 401k) will need to be reported each year. Read more>>

Can I discontinue my 401k after I have completed the business funding transaction?

For entrepreneurs using 401k funds to buy a business via a 401k business funding strategy, the franchise or other small business will need to adopt a 401k profit sharing plan. The Treasury regulations require that the plan be permanent (as opposed to a temporary) arrangement. These rules also generally provide that if a plan is discontinued within a few years after its adoption there is a presumption that it was not intended as a permanent program from its inception, unless Read more>>

Can I pay My Solo 401k Financial's fees with the proceeds of the 401k business financing transaction?

n its 2008 guidance regarding ROBS Business Financing, the IRS flagged the payment of fees as a potential prohibited transaction. In particular, the IRS stated that a prohibited transaction may occur where immediately after being funded via a ROBS transaction a corporation pays the professional fees of the ROBS facilitator out of the proceeds of the funding transaction. For this reason Read more>>

Do I have to invest persona funds in the new company?

If you employ a 401k Business Funding strategy to finance your new company, you are not required to invest any of your personal funds (i.e. money outside of your retirement account). However if the 401k owns 100% of the stock of the corporation, the assets of the corporation will be considered assets of the 401k plan under the Department of Labor’s Plan Asset Rules. In that case, Read more>>

Does a Form 5500 need to be filed for my company's 401k?

In its 2010 guidance, the IRS reported common ROBS operational mistakes made by new business owners using their retirement funds to pay business start-up costs (see here). The IRS noted a common misunderstanding that a Form 5500 is not required to be filed if the business is only owned by an individual and his or her spouse. In the referenced guidance,  Read more>>

I'm still employed, so can I use my existing 401k funds to fund my start-up company?

I called my employer and spoke to someone in the HR Department and they said that I can’t use funds in my 401k to fund start up business or in any investment outside the mutual funds offered under the employer 401k plan.  Are they allowed to do this? Read more>>

Can I invest funds in my 401a, 403b, 457 or government plan in my business start up?

Yes a 401A, a type of governmental plan offered to employees of the USA or governmental agency, or state government or political subdivision, may be transferred to a ROBS 401k. Read more>>

What does the IRS say?

No. The 401k SelfStarter Plan is what the IRS refers to as a Rollover as Business Startup. To learn more about what the Internal Revenue Service has said Read more>>