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>.