ROB(s) Your 401K to Buy or Build a Business and Get Away with It!
Roll Over Business Startup (ROBS)
The Fairy Tale and the Nightmare
And how to have a happy ending
Once upon a time, in a far-away land there was a hardworking, quite creative elf lady. She had a great job taking care of the reindeer and mucking stalls at the North Pole, but she longed to be an entrepreneur.
Now Santa’s Workshop paid well, and the benefits, especially the hot chocolate bar, were outstanding, but this elf wanted to create something of her own. She had a pile of ideas, a good start on her business plan but not a lot of cash, which is often required for a new business venture. “One day,” she often told herself.
Sound familiar? Are you looking for a Christmas miracle to come down your chimney? Wishing upon a shooting star?
Where is that fairy godmother when you need her?
Well, call me Rumpelstiltskin because I’m going to show you how to turn that pile of reindeer straw into pure gold. Well, not gold exactly. But you might be surprised where that rainbow leads; right to your own backyard. It leads right to your own 401K. Now don’t get your leprechauns all twisted in a knot over taxes and penalties and poison apples. Oh they’re out there, just like they were along the yellow brick road. But with a little courage, and some heart, you can “ROBS” your 401K to buy or build a business, tax and penalty free.
I just told you the magic word. Did you catch it? It’s ROBS, the Roll Over Business Startup strategy.
In this chapter of the story, we’ll cover
How to get started (don’t forget to leave a trail of bread crumbs)
How to make it work (start spinning that straw)
Similar Alternatives (choose your weapon carefully)
IRS scrutiny (the big bad wolf may come a-knockin’)
And how to get out (the happy ending of selling your business and retiring to Neverland)
The Roll Over Business Startup (ROBS) allows you to roll your 401K, in part or in its entirety, to a new 401K inside your new company. Your new 401K, inside your new company, then takes that cash and buys the stock, literally, the shares of your new company. Now your company has money to buy or build a business. Sound simple? Too simple? Maybe even too good to be true?
It’s not! It’s a true story!
As alluded to above, there are lots of rules and hoops to jump through. You will definitely want to build your ROBS out of brick, because the big bad wolf of the IRS will be lurking in the woods nearby, waiting for you to make a mistake.
The Trail of Breadcrumbs- The ROBS strategy in 10 Easy Steps
Start your new C Corp.
Start a 401K in your new company. This is a standard 401K, for you and the staff, with matching contributions and all the normal perks.
Initiate a rollover from your old 401K to your new 401K.
Liquidate the investments in the 401K so it’s all cash.
Now your 401K has cash to invest
Buy (invest in) stock of your C Corp.
This gives your C Corp money to buy assets, cover operating costs and hire staff.
When its time to sell or close your business, the company buys back its stock
Participants roll their 401K accounts over to a new 401K or IRA
Close the ROBS 401K
Pretty simple, right?
Now for the fine print, because there is plenty. Or start spinning that straw.
To Be Continued...
Don't miss the next chapter where we'll cover
entity specifics
hands off ownership
keeping your old job
Peace Out!
Della
Ready to sell your business?
https://www.shift-n-gears.com/9-steps-to-selling-your-business
