Can Roth IRA or Roth 401(k) Funds Be Used in a ROBS Structure?

searcher profile

April 03, 2025

by a searcher from Northwestern University - Kellogg School of Management in Chicago, IL, USA

I’m currently evaluating how to fund the equity portion of an SBA deal and had been planning to utilize a ROBS (Rollover as Business Startup) structure. However, I recently heard that ROBS can only be done with pre-tax funds, and not with money in a self-directed Roth IRA or Roth 401(k).

Before I rule it out, I want to validate whether that's actually true — and if so, whether any options exist to tap Roth funds (either IRA or 401(k)) for an equity injection, whether in an SBA deal or a larger independent sponsor structure.

Would love to hear from anyone who has:

Explored or used Roth IRA/401(k) funds in a business acquisition

Considered ROBS and hit this same Roth limitation

Found any creative or compliant workarounds

Worked with a provider who knows the nuances here

Appreciate any insights or resources — feel free to DM me if you prefer!

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commentor profile
Reply by a searcher
from Babson College in Clinton, CT, USA
Benetrends markets a ROBS+ product which appears to be a ROBS only using a Roth 401K instead of a traditional pre-tax 401K. I believe the idea is essentially the same as a ROBS only when you roll the funds out of a traditional 401K into the new Roth 401K, you pay tax at that time. In theory, at least how the sales pitch goes, if/when the business grows, those gains grow tax free because they're held in the Roth 401K. I would be VERY interested to hear from a business owner who's actually done this to learn what they're experience has been.
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Reply by an intermediary
from The University of Chicago in Chicago, IL, USA
This is outside my cup of tea. However, the benefit of ROBS is use of pre-tax $ for equity. I tried to use Roth $ to invest in a (non-ROBS) private company thinking that the gain would be tax-free. I was told that Roth IRA cannot buy security of a private company; it can only buy registered security (that is what Peter Tiel did when he bought PayPal stock). I can take money out of Roth w/o tax and buy the private security, but then the gain will be taxable.
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