The Checklist for Using ROBS to Fund Your Company

A Rollover for Business Startups (ROBS) allows you to invest existing retirement funds into your own business without triggering early withdrawal penalties or taxes.

You are not withdrawing the money; you are rolling it from a public investment (mutual funds) to a private investment (your C-Corp). This structure allows you to start Day 1 with operating capital, zero debt, and 100% equity retention.

Here is a short operational checklist for 2026.

Stage 1: The Eligibility Filter

Before you pay a setup fee, confirm your funds are compatible.

✅ Commonly Eligible Plans

• Traditional IRA
• 401(k) (From a former employer)
• 403(b) (Non-profit/Public school plans)
• TSP (Thrift Savings Plan)
• SEP and SIMPLE IRAs
• Roth 401(k)s

❌ Commonly Ineligible Plans (with Possible Exceptions)

• Roth IRA: Cannot be rolled into a 401(k) structure.
• Current Employer 401(k): Most plans prohibit "in-service" rollovers while you are still employed there.
• Inherited IRA: Generally cannot be rolled over.

Stage 2: Formation (The Structure)

You cannot use a standard LLC. The structure relies on specific tax provisions available only to C-Corporations.

• Step 1: Incorporate a C-Corporation.

  • Mandatory: Only C-Corps can issue "Qualified Employer Securities" (the stock your 401(k) will buy). S-Corps are ineligible.

• Step 2: Adopt a Qualified 401(k) Plan.

  • Your new C-Corp sponsors a new 401(k) profit-sharing plan designed to allow the purchase of private company stock.

Stage 3: The Transaction (The Money Move)

This is the capitalization event where funds become available for business use.

• Step 3: Trustee-to-Trustee Transfer.

  • Direct the custodian of your old account to roll funds directly into the new C-Corp 401(k) plan.
  • Critical: This must be a direct transfer. Do not have funds sent to you personally.

• Step 4: The Stock Purchase.

  • As Plan Trustee, you direct the new 401(k) to purchase stock in the C-Corp.
  • The 401(k) wires cash to the C-Corp's operating account; the C-Corp issues a stock certificate to the 401(k).

• Step 5: Deployment.

  • The C-Corp now holds "Operating Capital" to use for legitimate business expenses (equipment, marketing, payroll).

Stage 4: Ongoing Compliance

A ROBS is a living compliance ecosystem, not a one-time transaction.

1. Annual Filing (Form 5500): You must file this return every year (by July 31st) to report plan assets.
2. Annual Valuation: You must obtain an independent business valuation annually to determine the share price for the 401(k).
3. Active Employee Rule: You must be a bona fide employee (e.g., CEO), not a passive investor.
4. Nondiscrimination: If you hire eligible employees, you must generally offer them the ability to participate in the plan.