With bank financing difficult to obtain, many entrepreneurs must rely on their personal finances to provide the initial capital to start or buy a business. One place which is frequently considered is the funds in a retirement plan (401(k), 403(b), or traditional IRA). This presentation will cover the pros and cons of this approach to funding a business, which is known as a Rollover For Business Startups, or ROBS for short. We will also cover the logistics of using a ROBS to fund your business, and the costs involved.

1. The ultimate guide
for Business
Startups
Rollover

2. What is a Rollover For
Business Start-Up
(ROBS)

3. Using the funds in your retirement account.
The retirement account gets shares in the
company and the company gets money
which can be used to finance its operations.
A ROBS enables you to purchase
stock in your company

4. Because the stock in the company is privately
owned, the transaction is more complicated
than buying shares in a publicly traded
company like Wells Fargoor Apple.
A ROBS enables you to purchase
stock in your company

5. The pros
Of a Rollover for Business Start-ups

6. Charge interest rates that
are over 55% per year. As
a ROBS is not a loan, there
are no interest payments
or repayment of principal
due over any period.
Many providers of
capital to small
businesses

7. As a result, a company’s
initial cash-flow does not
have to be diverted to
paying off the debt and
interest.

8. Suggests that companies funded by
ROBS’s have a much better survival rate
than other startups, in part because they
are not starving the business for funds in
order to make debt payments.
David Nilssen, the
CEO and co-founder
of Guidant Financial

9. There are multiple benefits to using a
ROBS versus taking a loan with a
personal guarantee. A loan with a
personal guarantee means that the
business owner is guaranteeing the
payment of the loan even if the
business goes under.
If the business
does poorly

10. If the loan is not paid back,
the credit of the business
owner can be destroyed. With
a ROBS, the failure of the
business does not impact the
business owner’s credit.
If the business
does poorly

11. The cons
Of a Rollover for Business Start-ups

12. Typically, the initial costs are
around $5,000, and ongoing costs
are around $1,500 per year for a
company with 10 employees or
less. Because of these fees, it
generally doesn’t make financial
sense to do a ROBS for amounts
below $50,000, indicated Dallas
Kerley of Benetrends.
ROBS – The Costs

13. How does a robs work?

14. 1) The business owner establishes a C Corporation.
2) A valuation of the company is conducted to provide a stock price. As it’s
typically a brand new company, the value of the company typically equals the
initial capital invested.

15. 3) A qualified retirement plan (for the company covering all employees) is
established by the C Corporation. This can either be a profit sharing plan or
a 401K plan. The retirement plan provides, as one of its options, the ability
to buy stock in the company.

16. 4) The business owner rolls over a qualified retirement account such as a
401(k), traditional IRA, or 403(b) into the company’s retirement program.
5) The business owner elects to purchase company stock with some or all of
his or her retirement account with the company.

17. Commonly Asked Questions
about ROBS

18. Yes, it must be a C Corporation.
Does it have to be a C Corporation or can it
be an LLC, partnership, or S Corporation?

19. To be specific, a 401(k) is a profit sharing plan with a CODA. Under a
401(k) arrangement, the employee has the option of putting some
portion of his or her salary into the plan on a tax deferred basis.
What is the difference between a profit
sharing plan and a 401K plan?

20. A profit sharing plan which is not a 401(k) can be easier to set-up and
administer. The drawback is that only the employer can contribute to a
stand alone profit sharing plan.
What is the difference between a profit
sharing plan and a 401K plan?

21. Yes, the legal requirement is that the employer stock has to be made
“effectively available” to the employees in the same way it is available to
the owners. Such a purchase of employer stock can only be made with
retirement funds, such as retirement monies rolled over from another
retirement plan.
Do employees have to be provided the
opportunity to purchase stock in the company?

22. The actual cash accounts are held by a
brokerage firm such as Fidelity or TD
Ameritrade. According to Dallas Kerley,
the cost of having a firm like Fidelity or
TD Ameritrade hold the retirement
accounts is negligible or free.
Who is actually holding the
retirement accounts?

23. 79% Male Owned Businesses
21% Female Owned Businesses
Average Age: 50 Years Old
Average Amount Of Rollover: $180,000
Who is typically doing a Rollover For
Business Startups?

24. Type Of Company:
32% New Franchise
31% New Non-Franchise Business
4% Recapitalization of an Existing Business
33% Purchase of an Existing Business/Franchise
Who is typically doing a Rollover For
Business Startups?

25. Our Recommended Robs Provider
is Guidant Financial
Click Here To Learn More

26. Our Recommended Robs Provider
is Guidant Financial
Click Here To Learn More

27. Our Recommended Robs Provider
is Guidant Financial
Click Here To Learn More

28. Our Recommended Robs Provider
is Guidant Financial
Click Here To Learn More