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

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

1yr ago

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

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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reply by a professional 1yr ago
from Miami University of Ohio in Denver, CO, USA

I used ROBS to purchase my business, from my understanding ROTH is not eligible. Feel free to DM me if you have questions. I used Benetrends for my ROBS.

reply by a searcher 1yr ago
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.