Thursday, July 24, 2014


Beware of a small business financing tool that is growing in popularity.  The tool is known as ROBS.  ROBS are being marketed across the country by firms that help individuals administer the complex structure of the transaction.  ROBS is an acronym used by the IRS and stands for “Rollovers for Business Startups”.

In a nutshell, ROBS is a tax strategy that allows individuals with qualified retirement accounts to distribute funds (tax free) and rollover the funds to a start-up business.   The details for the structure of the transaction are very complex and beyond the scope of this blog.  However, anyone that is looking to use ROBS as a tool to fund their business should proceed carefully and make sure they are receiving competent advice.  There are many rules that govern the transactions within ROBS and there are very big penalties at stake if the rules are not followed correctly.   The IRS is aware of the complexity involved in these transactions and is targeting ROBS for more intense examination.
Be sure to seek independent advice before rushing into a quick decision.  Beyond the compliance requirements surrounding ROBS, the risks and rewards of placing all of your retirement assets into a new business need to be thoroughly evaluated.

Nick S. Wold, CPA, MA