I’m curious if anyone has heard of structuring a ROBS acquisition where the entrepreneur’s 401k is treated like a self-funded investor. Let me use an example to better illustrate what I am getting at: *Purchase price = $5M *SBA loan = $4M *Seller note = $0.5M *401k investment = $0.4M *Entrepreneur’s cash investment = $0.1M My understanding is that typically the entrepreneur would take a 20% share of the equity and the 401k would take 80%, consistent with the investments made of $0.1M and $0.4M, respectively. Is it possible to instead treat the 401k like an independent investor in a self-funded deal and issue it <20% equity with the remainder going to the entrepreneur? The argument for the IRS would be that you aren’t disadvantaging your 401k if you are giving it terms that are aligned to market norms for independent investors in similar deals.
FYI – the goal would be to allow the entrepreneur to capture a larger share of any dividend payouts and potentially accelerate a buyout of the 401k and conversion to an S Corp (recognizing there is probably additional complexity to work through with this latter piece – e.g., including market standard terms around early redemption).