Rollover as Business Startup (ROBS 401k) PROS and CONS – Q&A Webinar

We hosted a live webinar on our My Community to discuss the pros and cons of using a rollover as business startup (ROBS 401K) to fund the startup or purchase of a business with retirement funds.

How does a ROBS 401K work?

A rollover as business startup (ROBS) transaction allows you to use your retirement money to start or buy a business without paying taxes or penalties.

Key ROBS requirements

  • Use retirement funds in a former employer plan and/or non-Roth IRA
  • Use the funds to start or buy an active business (i.e. operating company providing goods and/or services)
  • C-corporation
  • Bona fide employee (e.g. 1000 hours per year)

ROBS 401k Process

  • Step 1: Incorporate C-corporation
  • Step 2: C-corporation sponsors 401k plan
  • Step 3: Rollover funds to 401k
  • Step 4: Invest 401k funds in the stock of the C-corporation
  • Step 5: C-corporation may use the funds for legitimate business purposes including to buy or start a business


#1 Invest Retirement Funds without incurring taxes or penalties 

  • Invest all eligible retirement funds (e.g. former employer plan and/or non-Roth IRA):
    • No taxes
    • No Penalties

#2 Start or buy a business “debt-free”

  • ROBS 401K investment structured as a stock purchase:
    • No loan payments required
    • Keep funds in the business to grow business

#3 No credit score, guarantee or underwriting requirements

  • A ROBS 401k is not a loan.
    • No credit score requirement
    • No underwriting
    • No personal guarantee

#4 Access funds quickly

  • With no underwriting or approval process, funds can be accessed relatively quickly:
    • Typically access funds in about 3 weeks

#5 Use funds as down payment on a loan

  • The proceeds of a ROBS 401K investment may be used as a downpayment to qualify for an SBA or other business loan.
    • Leverage funds to buy a bigger business

#6 Invest your retirement funds in yourself

  • With a ROBS 401k, your retirement funds are invested in your own business:
    • Instead of Wall Street stock investments, invest in business that you have complete control over
    • Invest in what you know


#1 You may lose your business and your retirement savings

  • If the business that is funded with your retirement funds fails, you may also ultimately lose all or a significant part of the retirement funds invested in the business.

#2 Must operate the business as a C-corp

  • As long as you own part of the business via the ROBS 401K, the business must be operated as a C-corporation.

#3 Must maintain a 401K plan

  • The ROBS C-corp must maintain a 401k plan:
    • Offer to eligible employees
    • Annual 5500 filing
    • Annual valuation, etc.

Continue the discussion in our My Community where our Owners host a daily LIVE webinar where you can ask questions and you can post questions in our forums: ROBS 401K Business Financing forum

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About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>


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