Using a 401k to Start a Business – Paying Setup Fees

After using my 401k to start a business, can my company immediately pay’s professional fees out of the proceeds of the business financing transaction?

In 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, our fees should be paid at the beginning of the process and with funds outside of your retirement account.

To learn more about using 401k to start a business generally, please visit our business funding page.