The ROBS plan allows entrepreneurs to tap their old 401k retirement funds to capitalize a new business. It works by rolling over the 401k to a new company you create, setting up a retirement plan there. The dollars are then invested into shares of your startup, funding the business in a tax-free manner. To make it work, you must create a C corporation with a 401k plan. Roll over your existing 401k into the new entity’s 401k. Then that plan purchases shares in your startup, becoming an owner. The funds provide operating capital tax-free. However, there are drawbacks – you must stay a C corp, which has tax disadvantages. And there are administrative requirements for the 401k. If you need capital to start a business, a ROBS plan provides a way to access retirement funds without taxes or penalties. But consider the ongoing drawbacks of remaining a C corporation and 401k admin needs. When executed properly, it lets you rollover an old 401k to fund a startup in a tax free way.
ROBS Plan Explained How to Use Your 410K to Fund Your Next Business
