ROBS UPSIDES | Frank Selden Law


What is a true ROBS upside to you? In our last post, we looked at the downsides. Now, let’s look at what works well about creating a business with ROBS funding. A Valentine’s day sunset champagne toast at the Paresa resort in Thailand as a bonus for a successful year? (Pictured below)

Most people see ROBS as a way to obtain financing – an upside in itself these days! – while avoiding the interest rates of commercial loans. True, without a loan, next month you have no interest payment to make. This is the most common upside to setting up a ROBS transaction. With a ROBS you can create so much more! Here are three other upsides for your consideration.

ROBS Upside #1 – Your Own Stock Market

What were your retirement funds invested in before you transferred them into your ROBS 401K plan? Typically some combination of stocks, bonds, and mutual funds. Your retirement funds are now invested in your own corporation. Your small-cap corporate stock, which comes with all of the risk and reward potential of this category. Do you understand the potential of this investment? I have clients who realized more than a 5,000% increase in their investment. Rare, but it happens. Can you create a 500% increase in the value of your retirement account’s investment? Yes. Guaranteed? Absolutely not.

An early client of mine invested $100,000 into a pool cleaning business in southern CA. He provided reliable service at a good price. In addition, he employed the right people to clean pools while he managed the growth of the business. Along the way, he created written operating procedures, a huge client list, and sold his business years later for about $1M. The Plan realized a 1,000% gain and, most noteworthy, paid no capital gains tax. The best publicly traded investment portfolio, with exact timing for buying and selling, is not likely to create this level of return in less than 10 years. He did not become a stock trader. Rather, he did what he knew best. He grew his retirement portfolio better than the best money managers could have.

I encourage all of my clients to look at their business selection from a plethora of positions, including their stock investment. What is your ROBS upside? Does it motivate you to get up in the morning to work on your business?

ROBS Upside #2 – Your own Paycheck

Business owners pay themselves last. That is the reality of owning your own business. However, by “last”, we mean what remains after all of the bills are paid (including wages of other employees, taxes, leases, etc). What if “what’s left over” is a big number? On the upside, how much are you allowed to pay yourself? Too much money at the end of the year is a great problem to have. I strongly recommend you find a CPA you can trust to talk you through the different choices available to a corporation flush with cash.

Consequently, you decide your own salary, bonus and benefits package. Some of my clients pay themselves $0 because that is what’s available. Others make as much as multiple six figures. Have a chat between yourself as an employee and employer. What do you want as an employee? You can say yes to yourself.

ROBS Upside #3 – Meaning

A new attorney recently asked a group of us where she should place her office. Other attorneys offered advice on what works to attract your client base. My advice was to pick somewhere she enjoyed working every day. Clients will only be there for a few hours. Do you like your view? Do you like walking up to your building, your parking experience (Seattle can be such a headache for parking), your neighbors? If she loves her office, potential clients will too. Same with your business. Create an enterprise that adds meaning to your life and those you care about.

When you select your business, pick something you love, something that adds meaning to your life every day. One of my clients bought a hamburger shop in the small town he grew up in. He remembered working there as a kid. It was, at times, about the only place a teenager could find employment. Even though that town is a drive of several hours, I visited him during his grand opening. Will he make a 1,000% increase in his investment? Not likely, he’s happy with 10%. What really makes him happy, though, is his positive impact on this small community that means so much to him.

If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them. 
- Henry David Thoreau

If you want to build a ROBS setup for your business, let us help you build that foundation right, right from the start. Download our ebook or schedule a phone consult here

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