ROBs/Search Fund

March 12, 2023

by a searcher from George Washington University in New York, NY, USA

Hi, has anyone ever tried to form a LLC with multiple investors and one of those investors used a ROBs C-Corp? My understanding of ROBs is that it has to be formed for the purpose of operating a business and that being an investor in a LLC that acquires the business might violate the rules for ROBs.

I've been reading online and I haven't found anything where ROBs was used in a multi-investor situation.

Reply by a searcher
from University of Pennsylvania in Seattle, WA, USA

My understanding is that what you are describing is disallowed because the OpCo needs to be a c-corp, not just an investor. . I do believe if you setup a c-corp as the OpCo, you can have other shareholders in the c-corp so investors would be allowed, just not under an LLC corporate form. I would reach out to Guidant or other advisors in the ROBS space to be certain of the rules.

Reply by a lender
from University of Missouri in St. Louis, MO, USA

Hi Hardy, I have some contacts for you that will be able to answer this. redacted We had a setup where multiple investors were using a ROBS injection. Not as simple but still works. Email or DM and we can discuss and make sure I’m understanding the situation correctly.

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