FAQs · Business Funding Trust

ROBS stands for Rollover for Business Startup. It is a legal structure that allows eligible retirement funds to be rolled into a new company-sponsored 401(k) plan, which then purchases stock in your new C corporation. The corporation receives working capital without an early-withdrawal tax or penalty.

No. ROBS does not create debt, interest, or a monthly loan payment. Your new 401(k) plan invests in stock issued by your C corporation, and the proceeds become business capital.

Yes. ROBS uses established provisions of the Internal Revenue Code and ERISA that permit qualified retirement plans to invest in employer stock. The arrangement must be established and administered correctly to remain compliant.

Traditional 401(k), 403(b), eligible IRA, SEP-IRA, and certain other qualified retirement funds may be eligible. Roth accounts and funds held in a current employer plan can be subject to additional restrictions.

Yes. You can roll over the amount appropriate for your business plan and retain the rest in other retirement investments. The right amount depends on your capital needs, reserves, and risk tolerance.

Yes. Properly structured ROBS funds may be used to launch a new company, purchase a franchise, or acquire an existing business. The funds must be used for legitimate business purposes.

A C corporation can issue qualifying employer stock that a 401(k) plan is permitted to purchase. LLCs, sole proprietorships, partnerships, and S corporations do not support the required stock transaction.

Timing depends on corporate formation, retirement-account transfers, and the responsiveness of all institutions involved. A properly coordinated setup commonly takes several weeks from document preparation through funding.

Yes. The ROBS structure is intended for an active operating business. The owner whose retirement funds are invested must receive a W2.

Yes. Employees who satisfy the plan’s eligibility requirements must be given the opportunity to participate. They are not required to contribute, but eligible employees cannot be improperly excluded.

The plan requires annual Form 5500 reporting, otherwise simple participant records, and normal corporate records such as minutes and tax filings. Business Funding Trust provides any needed forms for your files, guidance and is always available by phone and email.

Yes. Many entrepreneurs use ROBS as the equity injection for an SBA-backed loan. Combining the two can increase available capital while reducing the amount that must be borrowed.

Business Funding Trust charges a flat $4,950 all-in fee, paid only after the funds are in your business account. There is no upfront fee, no monthly plan-administration fee, and no per-employee charge from Business Funding Trust.

A correctly completed rollover is not treated as a taxable distribution, so the ordinary income tax and 10% early-withdrawal penalty that usually apply to an early withdrawal are avoided.

The retirement plan owns stock in the company. If the company loses value or closes, that stock may lose some or all of its value. Business assets or sale proceeds may preserve part of the investment, but business risk cannot be eliminated.

Use realistic financial projections, maintain adequate working capital, preserve personal reserves, understand the industry, and work with experienced legal, tax, and ROBS professionals. Some owners choose to roll over only part of their retirement savings.

Yes. The company’s 401(k) remains an active retirement plan. The owner and eligible employees may make ongoing contributions, subject to plan terms and annual IRS limits. Employer contributions may also be available.

Start with a conversation about your retirement accounts, business opportunity, required capital, and timing. Business Funding Trust can help determine whether ROBS is a suitable option before you commit to the structure.