A Rollover for Business Startups (ROBS) allows you to invest existing retirement funds into your own business without triggering early withdrawal penalties or taxes.
You are not withdrawing the money; you are rolling it from a public investment (mutual funds) to a private investment (your C-Corp). This structure allows you to start Day 1 with operating capital, zero debt, and 100% equity retention.
Here is a short operational checklist for 2026.
Stage 1: The Eligibility Filter
Before you pay a setup fee, confirm your funds are compatible.
✅ Commonly Eligible Plans
- Traditional IRA
- 401(k) (From a former employer)
- 403(b) (Non-profit/Public school plans)
- TSP (Thrift Savings Plan)
- SEP and SIMPLE IRAs
- Roth 401(k)s
❌ Commonly Ineligible Plans (with Possible Exceptions)
- Roth IRA: Cannot be rolled into a 401(k) structure.
- Current Employer 401(k): Most plans prohibit "in-service" rollovers while you are still employed there.
- Inherited IRA: Generally cannot be rolled over.
Stage 2: Formation (The Structure)
You cannot use a standard LLC. The structure relies on specific tax provisions available only to C-Corporations.
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Step 1: Incorporate a C-Corporation.
- Mandatory: Only C-Corps can issue "Qualified Employer Securities" (the stock your 401(k) will buy). S-Corps are ineligible.
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Step 2: Adopt a Qualified 401(k) Plan.
- Your new C-Corp sponsors a new 401(k) profit-sharing plan designed to allow the purchase of private company stock.
Stage 3: The Transaction (The Money Move)
This is the capitalization event where funds become available for business use.
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Step 3: Trustee-to-Trustee Transfer.
- Direct the custodian of your old account to roll funds directly into the new C-Corp 401(k) plan.
- Critical: This must be a direct transfer. Do not have funds sent to you personally.
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Step 4: The Stock Purchase.
- As Plan Trustee, you direct the new 401(k) to purchase stock in the C-Corp.
- The 401(k) wires cash to the C-Corp's operating account; the C-Corp issues a stock certificate to the 401(k).
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Step 5: Deployment.
- The C-Corp now holds "Operating Capital" to use for legitimate business expenses (equipment, marketing, payroll).
Stage 4: Ongoing Compliance
A ROBS is a living compliance ecosystem, not a one-time transaction.
- Annual Filing (Form 5500): You must file this return every year (by July 31st) to report plan assets.
- Annual Valuation: You must obtain an independent business valuation annually to determine the share price for the 401(k).
- Active Employee Rule: You must be a bona fide employee (e.g., CEO), not a passive investor.
- Nondiscrimination: If you hire eligible employees, you must generally offer them the ability to participate in the plan.