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

by a searcher from Boston University - Questrom School of Business

4 years ago

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. 

1 like
165 views
3 comments

admin from Stanford University - Graduate School of Business

Hi, ^Searchfunder member‌ - 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

4 years ago | like reply | 2 likes

searcher from University of Virginia-McIntire - McIntire School of Commerce

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.

4 years ago | like reply | 3 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

Investor seeking Self-Funded Search Deals

What are market terms for Seller Notes?

2 Best Ways To Find Motivated Sellers, Off-Market Deals

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.