401k Rollover Business Startup 2017-11-24T10:24:38+00:00

401(k) Rollover Business Startup

Financing a new or existing businesses using your own retirement funds is a funding mechanism called a RollOver Business Startup (ROBS). Opinions about the legal validity of the ROBS strategy range from blatantly illegal, to so complex that it needs to be avoided, to so easy an entrepreneur just needs pay a particular company and sign a few forms. There is no specific, single rule that delineates a ROBS approach and no rule that prohibits it. Rather, the strategy uses regulations from several sources which, when pieced together in the right framework, allows individuals to invest their own retirement funds into a corporation that sponsoring employer’s properly drafted 401(k) plan.

A Rollover Business Startup is a viable funding strategy

A 401(k) Rollover Business Startup strategy is a viable funding strategy if the entrepreneur follows all of the legal requirements for establishing and operating 401(k) plans and for offering Qualified Employer Securities to employees. I believe that some ROBS promoters over-simplify a client’s duties. This arrangement is not for everyone!

A properly structured and administered ROBS arrangement can satisfy both the requirements and spirit of the tax laws and serve legitimate tax and business planning purposes. It is critical, however, that entrepreneurs who fund their businesses through Rollover Business Startup arrangements understand the possible legal pitfalls and take seriously their ongoing responsibilities as fiduciaries of their companies’ retirement plans.

For a simple diagram of a proper Rollover Business Startup structure click <here>.

Frank Selden Law has successfully helped
over 1,200 clients, attorneys and CPAs
with a Rollover Business Startup strategy.

One expert suggests that around 10% of the 600,000 businesses started last year involved retirement funds. Some of that 10% are passive investments with little complications. However, for those businesses where the investor is also an employee, officer, director or other shareholder of that business the rules are more complex.

The IRS’ Employee Plans Compliance Unit (EPCU) launched a “rollovers as business start-ups” (ROBS) project in 2008. EPCU sent compliance contact letters to ROBS plan sponsors and numerous businesses who used this type of funding. Documents created by the IRS during this project are below. The project closed in 2013. Anyone contemplating setting up a ROBS arrangement should familiarize themselves with these IRS articles.

Rollover Business Startup Resources and Links

All information on this website, including any links and documents linked to below, is given for legal education and promotion of legal services only. It may not work for  your specific situation. Use of information on this website does not create an attorney client relationship. If you want to discuss whether a ROBS is appropriate for your business concept or want legal advice about maintaining or dissolving your ROBS arrangement, please give me a call at 425.990.10021 or e-mail office@frankseldenlaw.com

Rollover Business Startup Webinars

For attorneys seeking CLE credit use this link . LawLine charges $99 and provides CLE credit in most states. If you do not see your State listed, ask them first whether CLE credit is available before purchasing.  http://www.lawline.com/cle/course/rollover-business-startup-robs-creation-creativity-compliance

If you just want to see the video for free – no CLE credit available – go to https://www.youtube.com/watch?v=zltz4AxmnsM&list=PLcIGldMaRARQat6FTDClY7y0B-5mFKVaY