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ROBS Business Financing Strategy: THE 8-STEP GUIDE

May 23, 2018

You’ve decided that the ROBS business financing strategy is how you want to finance the start of a new business or growth of an existing business and want to get down to the nitty gritty of how the strategy is setup and implemented. Well, we won’t leave you hanging. Below is the 8-step guide to using retirement monies (IRA, 401(k), 403(b), 457, pension, profit share, etc.) to fund your business venture.

8-Steps to the ROBS Business Financing Strategy

  1. Find a licensed ROBS Promoter
  2. Establish a new C-corporation
  3. Invest into the new C-corp.
  4. Adopt the retirement plan
  5. Rollover and transfer
  6. Buying corporate stock
  7. Confirmation
  8. Grow your business!

STEP 1: Find an experienced and licensed ROBS professional

There is a lot more you can do with the ROBS business financing strategy than simply putting a C-Corporation and a 401(k) Plan in place. So, finding an experienced and licensed ROBS professional (also known as a ROBS Promoter) is paramount and probably the most important step in this entire process. There are a lot of companies that promote the ROBS strategy, however, it’s important to know how to select your ROBS provider to determine who has the expertise to advise you in the ROBS strategy throughout the implementation process and ongoing compliance.

The best ROBS providers out there are licensed professionals (e.g. attorney, CPA, investment advisor). For example, attorneys familiar with securities and retirement plan regulations will generally help you vet out the desired business and determine the prudency of the intended investment and more. A good ROBS provider will help you set up the various required legal entities and work alongside retirement plan administrators, like Leading Retirement Solutions, to set up the ROBS strategy, Corporation and Retirement Plan to be compliant with government regulations over time. They will also recommend the most beneficial business financing, retirement savings and tax reduction structure(s) for you and your company.

STEP 2: Establish a new C-Corp

After you narrowed down your list and you finally settled on a ROBS Provider, your Provider will begin the process by establishing a new C-Corporation for you that sponsors a new Retirement Plan (usually a 401(k) Plan, although there are several different options that should be considered depending on your ultimate goals). Many ROBS Providers will require you to establish a new Corporation and a new retirement plan, however, if you already have one or both entities in place there is no need to create new ones.

STEP 3: Invest into the new C-Corp

The ROBS Provider will then claim that the Retirement Plan is a “special” plan that contains unique language allowing plan participants to invest their retirement plan account balance into private stock of the company the client also operates.

STEP 4: Adopt the retirement plan

The Corporation will then adopt the Retirement Plan. Typically, at this point, the Corporation has no assets or business operations and you are the only employee and participant in the Retirement Plan.

STEP 5: Rollover and transfer

Next, the ROBS Provider will assist you with the rollover and transfer of your existing retirement money into the newly adopted Retirement Plan. If you did your research and hired a good ROBS Promoter (Step 1) then this transition should go smoothly and be done in a compliant manner. Meaning your retirement monies should remain tax deferred and no taxable/penalty event is triggered.

STEP 6: Buying stock

You will then direct the Retirement Plan to purchase qualified employer securities (aka corporate stock) in the new Corporation. Funds are transferred from the Retirement Plan to the checking account of your Corporation. Now your Corporation has the operating capital it needs to pursue your business strategy.

STEP 7: Confirmation

Your ROBS Provider should now confirm that you have completed the ROBS strategy adhering to the Employee Retirement Income Security Act (ERISA) § 408(e) and other regulations. Relying on ERISA and other regulatory exemptions, as well as your ROBS Provider’s advice, you should pay no taxes or penalties for distribution or early withdrawal of your retirement monies.


For your reference, here is the 8-Step Guide as an infographic.


If you'd like to learn more about the ROBS strategy, check out the the page below for a full list of our ROBS articles:

Everything You Need To Know About The ROBS Strategy For Business Financing

For more tips and information regarding retirement plans, contact us.

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