ROBS Compliance Checklist: Keeping Your Plan Legally Bulletproof Year After Year |

Establishing a Rollover for Business Startup (ROBS) arrangement is only the beginning. To maintain the legal integrity of the structure — and to protect yourself from plan disqualification — ongoing compliance is essential with the help of Business Funding Trust. Here is a practical checklist of the key requirements that must be maintained throughout the life of your ROBS arrangement.

Annual Form 5500 Filing. Every year, the corporation’s 401(k) plan must file Form 5500 with the IRS and the Department of Labor. This filing reports on the assets held by the plan and its participants. Missing or late filings trigger penalties and can draw IRS attention to the plan. The assets are simply the stock and contributions made to the plan.

What You Need to Know

Reasonable Compensation for the Owner. You work in the business; you must receive a reasonable minimum salary — one that is comparable to market rates for your role. Underpaying yourself (or not paying yourself at all) raises questions about whether the structure is being used for its intended purpose.

Plan Availability to All Eligible Employees. The 401(k) plan must be offered to all employees who meet the plan’s eligibility requirements. Restricting the plan to the owner while excluding qualifying employees is a plan qualification violation. However, employees do not have to participate and many never do. The process is simply completed through the payroll process. Contributions go into standard mutual funds. Business Funding Trust provides all the forms needed for the employees.

Corporate Formalities. The C corporation must operate as a genuine business entity. This means documenting board meetings, maintaining separate corporate bank accounts, filing corporate tax returns (Form 1120), and keeping proper corporate records. This process is not difficult and completed with standard templates by business owners.

Plan Document Updates. Tax law changes periodically, and the 401(k) plan documents must be updated to remain compliant with current law. Business Funding Trust provides the updates at no charge.

Compliance does not need to be complicated or difficult. Working with a provider that keeps it simple is important.

Ready to Take the Next Step?

Ready to explore whether your 401(k) can fund your entrepreneurial dream? Contact Business Funding Trust today for a free consultation. Our specialists can walk you through your options, help you understand the process, and lead you to a successfully funded business.