Rollover for Business Startups (ROBS) - Has anyone used this program?

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January 17, 2020

by a searcher from Boston University - Questrom School of Business in Boston, MA, USA

There are several options for purchasing a business. ROBS is a program that allows you to use your 401k funds tax free to invest in a business. I'm curious if anyone has done this or has some experience.


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Reply by a searcher
from University of Virginia in New York, NY, USA
The recent changes in the tax code have made C-Corps more viable and highly dependent on your specific situation (location, estimated hold period, stock vs. asset deal at exit, etc). If you live in a state with high individual tax (e.g. NY vs. Florida) it is worth a look. In most situations your excess cash flow is going to be used to repay debt or reinvested for growth vs. distributed to shareholders. Rather than paying a high personal tax rate from a pass through entity you can keep it at the corporate level in a C-Corp.

If you structure your investment as a QSBS you could also avoid taxation when you sell depending again on where you live, how large the capital gain, and whether you sell stock vs. assets.

I'd recommend you speak with a tax adviser to see what is best for your specific situation. It is worth the additional cost.
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Reply by an admin
from Stanford University in Honolulu, HI, USA
Hi, ^redacted‌ - Here are 2 additional posts that may be useful: https://www.searchfunder.com/post/self-directed-401k-as-a-funding-source and https://www.searchfunder.com/post/does-anyone-have-experience-with-financing-via-ira401k
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