Rollovers as Business Startups (ROBS): How to Fund Your Business With Your 401(k)

Webinar Wednesday, Episode 357

What if you could fund your business dream using money you’ve already saved — with no loans, no debt, and no early withdrawal penalties? It sounds too good to be true, but it’s a legal, IRS-recognized strategy thousands of entrepreneurs have used. It’s called a Rollover as Business Startup (ROBS) — and most small business owners have never heard of it.

What exactly is a ROBS?

A Rollover as Business Startup (ROBS) is a tax-free financial transaction that allows you to use your 401(k), IRA, or other retirement savings to fund a new business startup or purchase an existing business — without paying early withdrawal penalties or triggering a taxable event. In this episode of Webinar Wednesday, SBDC Director Kelly Bearden is joined by Certified Public Accountant Mickey Parker, co-owner of Accelefund, to walk through everything you need to know.

If you’re on the other side of that transaction — ready to exit rather than buy — our guide on how to sell your business in 6 steps walks through what to prepare before you list.

ROBS isn’t the only path to funding your business without a traditional loan — see our roundup of 6 alternative funding options worth exploring.

How It Works

The 4 steps to setting up a ROBS

Step 1

Form a C Corporation

A ROBS requires your business to be structured as a C Corporation — not an LLC or sole proprietorship. This is because only a C Corp can create a retirement plan that is eligible to own company stock. This is a non-negotiable requirement of the structure.

Step 2

Create a new retirement plan for the C Corp

Your new C Corporation establishes its own 401(k) or profit-sharing retirement plan. You become an employee of the corporation and a beneficiary of this new plan. This plan must be available to all eligible employees — not just you — which is a key ongoing compliance requirement.

Step 3

Roll over your existing retirement funds

Your existing 401(k), IRA, or other eligible retirement account is rolled over into the new C Corp retirement plan. Eligible accounts include traditional 401(k)s, 403(b)s, traditional IRAs, SEP IRAs, and SIMPLE IRAs. Partial rollovers are allowed — you don’t have to use your entire retirement balance.

Step 4

The retirement plan buys stock in your C Corp

The new retirement plan uses the rolled-over funds to purchase stock in your C Corporation. This puts the capital directly into your business as equity — not as a loan. You can then use those funds for startup costs, equipment, working capital, real estate, or as an equity injection to meet SBA loan requirements.

Also Worth Knowing

Key facts every potential ROBS user should understand

Mickey Parker covered several critical details that often get overlooked:

Cost to set up

Setup fees typically run around $5,000, with ongoing administration costs of $99–$150 per month. Always work with a CPA and an ERISA specialist to ensure full legal compliance.

ROBS vs. self-directed IRA

A ROBS allows you to actively manage your business and pay yourself a salary. A self-directed IRA restricts your management role and typically caps ownership at 49% — a key difference if you want to run the business yourself.

Can I use ROBS for an existing business?

Yes — a ROBS can be used to inject capital into an existing business, not just startups. It’s also commonly used to meet SBA loan equity injection requirements when purchasing a business.

Ongoing compliance is critical

A ROBS is not a one-time transaction. You must maintain the retirement plan, file annual reports, and make the plan available to eligible employees. Non-compliance can trigger IRS penalties and tax liabilities.

Is a ROBS right for you?

A ROBS may be a strong fit if you:

✅ Have significant retirement savings (typically $50,000+)

✅ Want to start or buy a business without taking on debt

✅ Need an equity injection to qualify for an SBA loan

✅ Are comfortable with the risks of investing retirement funds in your business

✅ Are committed to maintaining ongoing IRS and ERISA compliance

A ROBS is not recommended if your retirement savings represent your only financial safety net, or if the complexity of ongoing compliance feels unmanageable without professional support. Always consult with a CPA and ERISA specialist before proceeding.

ROBS and Required Minimum Distributions (RMDs): What You Need to Know

If you already have a ROBS plan and are approaching age 73, you may be wondering how Required Minimum Distribution rules apply when your retirement funds are invested in your own company’s stock. Here is what publicly available IRS guidance and ROBS plan administrators tell us.

What is an RMD and when does it apply?

According to the IRS, Required Minimum Distributions are the minimum amounts you must withdraw from your retirement accounts each year. The current trigger age is 73, raised from 72 by the SECURE 2.0 Act. Because a ROBS plan uses a 401(k), RMD rules apply.

irs.gov — Retirement Plan and IRA Required Minimum Distributions FAQs

Why are RMDs more complicated in a ROBS plan?

In a standard ROBS arrangement, your retirement plan owns stock in your C Corporation — not cash or publicly traded securities. When an RMD is due, that stock may be illiquid, requiring additional steps to process the distribution. As Accelefund notes, monitoring required minimum distributions is a standard part of ongoing ROBS plan administration.

Does your ownership percentage matter?

Yes — significantly. According to IRS rules:

5% or less ownership: You may defer your RMD until after you separate from service with the company.
More than 5% ownership: You must begin taking RMDs at age 73 regardless of whether you are still actively running the business.

irs.gov — Retirement Topics: Required Minimum Distributions

What are your options?

Mickey Parker, CPA and co-owner of Accelefund — a ROBS plan administrator — outlines three approaches that may be available:

Stock redemption: The company redeems enough shares — based on a current business valuation — to generate the cash needed for the RMD.
In-kind distribution of shares: The retirement plan transfers shares directly to the account holder. Mickey discussed this approach and the related Net Unrealized Appreciation (NUA) strategy during our Webinar Wednesday ROBS session.
Corporate dividend: The corporation declares a cash dividend deposited into the retirement plan’s custodial account, which is then used to fund the RMD. No business valuation is required.

Source: Accelefund.com

This section is provided for general educational purposes only and does not constitute tax, legal, or financial advice. RMD planning within a ROBS structure involves business valuation, ERISA compliance, tax strategy, and legal documentation. Always consult a qualified CPA and ERISA attorney for guidance specific to your situation.

Mickey Parker, CPA — Co-owner, Accelefund

Mickey Parker is a Certified Public Accountant and co-owner of Accelefund, a firm specializing in ROBS transactions and business funding strategies. With deep expertise in ERISA compliance and tax-free business financing, Mickey helps entrepreneurs across California navigate the ROBS process from setup through ongoing administration.

Wondering if a ROBS is right for your situation?

The CSUB SBDC offers free one-on-one advising to small business owners throughout Kern, Inyo, and Mono Counties. Our Capital Access Center advisors can help you evaluate ROBS alongside other funding options — SBA loans, grants, crowdfunding, and more — so you can make the best decision for your situation.

Watch the full webinar

This blog post covers the highlights, but the full episode includes Mickey Parker walking through real-world ROBS examples, a California net unrealized appreciation tax deferral strategy, exit planning options, and a live Q&A with attendees.

▶ Watch “Rollovers as Business Startups (ROBS)” on demand →

ROBS Rollovers as Business Startups Business Funding 401k Business Funding Start a Business Capital Access SBA Loans Kern County Inyo County Mono County Webinar Wednesday

Kelly Bearden — CSUB SBDC Director

Kelly Bearden leads the CSU Bakersfield Small Business Development Center, serving small business owners throughout Kern, Inyo, and Mono Counties. The SBDC provides free one-on-one advising and helped local businesses access nearly $9.9 million in capital investment in 2024.