Exploring ways to finance your new business venture? Discover the ROBS (Rollover for Business Startup) program, tailored for entrepreneurs to use their retirement funds for startup capital.
Here's how it works:
No Credit Impact
Tax Benefits
Quick Access
Fees
Understanding the Risks
Results from the ROBS Project indicated that, although there were some success stories, most ROBS businesses either failed or were on the road to failure with high rates of bankruptcy (business and personal), liens (business and personal), and corporate dissolutions by individual Secretaries of State.
Some of the individuals who started ROBS plans lost not only the retirement assets they accumulated over many years, but also their business. Much of the retirement savings invested in their unsuccessful ROBS plan was depleted or ‘lost,’ in many cases even before they had begun to offer their product or service to the public.
- If the sponsor amends the plan to prevent other employees from participating after the DL is issued, this may violate the Code qualification requirements. These types of amendments tend to result in problems with coverage, discrimination and potentially result in violations of benefits, rights and features requirements.
- Promoter fees
- Failure to issue a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., when the assets are rolled over into the ROBS plan.
Here are a few pros and cons as to whether you should consider utilizing the ROBS (Rollover for Business Startups) programs.
PROS
CONS
- Provides tax and penalty free access to retirement funds
- Credit Score is not needed
- No interest charges or loan payments required
- Funds can be used in a variety of ways related to the business
- Doesn't require a collateral
- Must be a C-Corp to qualify
- There is a big risk of losing your funds if business fails
- Completing a ROBS can take a few weeks
- Must adhere to compliance requirements to avoid penalties
- Many ROBS charge a one time fee maintenance & recurring fee
Heather Brackin
Project Coordinator on our team, Heather has experience working with all of our service lines. As a recent accounting gradute, she enjoys learning about the changing laws and rules that will affect our clients.
