# ROBS (Rollovers as Business Start-ups)

A structure that rolls a 401(k) or IRA into a business, penalty-free and untaxed.

You roll the retirement account into a [C corporation](https://searchspheresource.com/glossary/entity-type)'s plan, the plan buys the company's stock, and the company uses the cash, so no early-withdrawal penalty and no tax on a distribution apply. It turns retirement money into [equity injection](https://searchspheresource.com/glossary/equity-injection) without new debt, at the price of strict ongoing compliance and of concentrating your retirement in the business you now run. The compliance is not a formality. The C corporation has to keep a real plan, offer it to employees, and file for it every year. A plan run in a way that discriminates, or that engages in a prohibited transaction, can be disqualified, with adverse tax consequences for its sponsor and participants. Weigh it against the plainer alternatives first, because a bad year hits your savings and your income at the same time. Beside an SBA loan the plan's sponsor guarantees the loan in full whatever their stake, and loan money cannot pay the plan's setup costs.

In numbers: Rolling $150k of a 401(k) into a ROBS structure funds that much of the injection with no early-withdrawal penalty or new loan; the cost is putting retirement savings into the single business you are also betting your income on.

Source: https://searchspheresource.com/glossary/robs
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