401K Business Financing / Rollover for Business Startup

Quick , Debt Free Business Funding with No Tax Penalties

401K Business Financing

Quick , Debt Free Business Funding with No Tax Penalties

401K Business Financing

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Quick , Debt Free Business Funding with No Tax Penalties

Why fund your business with 401(k) Business Financing?

No Debt

Using retirement funds to start a business debt-free will lower your overhead and eliminate risking your home equity. Without loan interest to pay, you can make money sooner rather than later.

    Tax-Deferred

    Since you won’t have to take a taxable distribution using this structure, you can save more for retirement.

    Control

    Funding a business with a 401K allows you to control your retirement funds so you can invest in yourself and create the life you want.

    401K Business Funding Structure

    This tried-and-true structure is a fast, legal funding option that’s been in use since the Employee Retirement Income Security Act became a law in 1974.

    No Debt

    Starting your business debt-free will lower your overhead and eliminate risking your home equity. Without loan interest to pay, you can make money sooner rather than later.

      Tax-Deferred

      Since you won’t have to take a taxable distribution using this structure, you can save more for retirement.

      Control

      This funding method allows you to control your retirement funds so you can invest in yourself and create the life you want.

      Confidence

      This tried-and-true structure is a fast, legal funding option that’s been in use since the Employee Retirement Income Security Act became a law in 1974.

      What is the criteria for using my retirement funds?

      Funding Amount

      • Roll over up to 100% of your retirement account balance
      • Minimum $50,000

        • Eligibility

        • Rollable, pre-tax retirement assets – 401(k), 403(b), Traditional IRA, TST, SEP or Keogh accounts
        • Owner must be an employee of the business

        Benefits

        • Debt-free funding option
        • No collateral needed
        • No tax penalties
        • No interest

        Timing

        • Funding in 3 weeks on average
        • Business must be formed to fund

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        ROBS 401K / 401K Business Financing FAQ

        What does ROBS 401K financing mean? How do I use a ROBS 401K to buy or start a business?

        It stands for Rollover for Business Startup.  It is a way to use your retirement accounts (401(k) or IRA) to invest in your business without having to pay early withdrawal penalties or taxes.  

        Am I able to stay at my job and still utilize my 401(k) to fund my new business venture?

        You can only use a 401(k) from a previous employer.  If your 401(k) is with a current employer, you must leave your employment position before you are able to utilize the funds for your business.

        What is the minimum amount that can be used?

        45K to 50K is normally the minimum amount of funds to rollover to make it worth the fees that are incurred for the service.

        Can I form a sole proprietorship, LLC or S Corporation If I am going to utilize the ROBS program?

        No, only a C Corporation will work due to IRS restrictions.

        Can I use ANY IRA or 401(k) for the ROBS?

        Roth IRAs and Roth 401(k) accounts cannot be used because they are not tax deferred accounts.

        Can I use my 401k to buy a business?

        Whether you are buying an existing business or funding a startup, you are free to fund your business using your 401K as long as you meet certain criteria.  Criteria includes leaving your current job and being an employee of the new C Corporation.  You can also buy a business through a combination of a rollover and SBA Acquisition Loan.  There are risks when using retirement funds as a funding source. If the business fails, you risk losing your retirement savings.

        What is actually occurring when a ROBS is set up?

        A C Corporation is formed and a new 401(k) plan is set up for the C Corporation.  Funds are transferred from the personal retirement account to the new 401(K) account of the C Corporation.  The funds are used to purchase stock in the C Corporation.  The stock is sold and proceeds are used for the business expenses (franchise fees, working capital, equipment purchase, build out, etc.)  All of this is done carefully in order to comply with tax laws and IRS and Department of Labor rules and regulations.  

        Are there any restrictions with respect to paying myself a salary from the Rollover funds?

        There are different ways to set up the ROBS. It is important that the program be set up properly in order to avoid any restrictions with respect to your own payroll. Some programs require that the business be showing a certain amount of revenue before a salary can be paid to yourself. If the plan is set up right, there should be no time frame to wait or level of revenue to attain in order to pay yourself a salary.

        Is it possible to write off the fee that I pay to get the ROBS done?

        If the ROBS program is set up correctly, the fee for the service can be tax deductible (a write off) for your new business.

        Can Key Commercial Capital recommend experienced professionals who set up the ROBS?

        Yes, we have established relationships with experts in the industry and can set up a free consultation for you.  It is important that you understand the options and details so you can make an informed decision. Many of our clients utilize a ROBS and SBA loan combination.  We are very familiar with how to assist you in getting this done.

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