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ROBS Program Question: I am funding a new hair salon with $150,000 of 401k funds and $50,000 from my savings. I see that the new C-corporation is authorized to issue 1 million shares. Does this mean that 750,000 shares will be issued to my 401k and 250,000 shares issued to me personally?
Good question!
No – the shares will be issued for a $1 per share. It is a best practice to leave a portion of the shares as authorized but not issued so that they are available for future investment(s) if desired.
In order to use one’s retirement funds for business financing without having to pay taxes or penalties, one must follow specific steps including investing one’s retirement funds in the stock of a new C-corporation.
When the C-corporation is registered with the Secretary of State, one has to let the Secretary of State know how many shares the corporation is authorized to issue.
For example, the corporation may be authorized to issue 1,000,000 shares but as part of the initial investment via the ROBS program issue shares at a $1 per share such that there remain authorized but unissued shares.
