Three Options to Fund Your Private Business Venture

1) Rollovers as Business Startups (ROBS):

  • ROBS generally allow access to your retirement funds tax and penalty-free.
  • ROBS transactions generally do not require scheduled loan repayments. Retirement assets remain subject to the rules governing qualified retirement plans.
  • Advantage to a bank loan:
      • You do not need a good credit score, or to pledge your home as collateral.

Cost:

  • $4,000 initial setup.
  • $150/month ongoing.

Qualifications:

  • Eligibility depends on the type of retirement account and whether the assets are eligible for rollover.
  • Individuals should consult their plan administrator and qualified tax professionals regarding eligibility.
  • You generally need more than $50,000 in retirement assets to qualify for ROBS.
  • Your new company must be registered as a C-corp.
  • Qualified retirement plans sponsoring a ROBS arrangement must comply with applicable employee participation and nondiscrimination requirements.

Creating a ROBS:

  1. Create a C corporation.
  2. Set up a company retirement plan for your new C corporation. 
  3. Roll existing retirement funds into the new company retirement plan. 
  4. Have the plan purchase stock in the C Corp via a Qualified Employer Stock (QES) transaction. 
  5. Once the transaction is complete, your retirement funds will be available to the corporation 

Exiting a ROBS:

  1. Determine the value of your company stock. 
  2. Repurchase the stock from the company retirement plan. You will need to establish a bank account to initially hold the funds before they are rolled into your IRA.
  3. You will need to properly terminate your company retirement plan & notify employees.
  4. File your final Form 5500.

2) 401(k) Loan:

  • Maximum withdrawal is the lesser of 50% of your vested balance or $50,000.
  • Loans must be repaid within 5 years, with quarterly interest payments.
  • Loan interest rates are set by the administrator.

3) 401(k) Withdrawal:

  • If you are younger than 59½, you may be subject to a 10% early withdrawal penalty.
  • Amount withdrawn is taxed as ordinary income in the year of distribution.

*The examples and concepts presented in this material are for educational and illustrative purposes only. Individuals should consult with their financial professional before making any decisions. 

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IRA-to-HSA Rollover Solution
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Disclosures: Information contained herein is intended for informational, illustrative and/or educational use only and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose nor shall it be construed to be the provision of individualized investment, tax or legal advice. Endowment Wealth Management, Inc. (“EWM”) is not soliciting or recommending any action based on this material. This is neither an offer nor a solicitation to buy/or sell securities in any state or jurisdiction where EWM is not registered, or notice filed and does not qualify for an exemption from such registration and notice filing requirements. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that consider all of the particular facts and circumstances of the investor’s own situation. All investments involve risk and potential loss of capital and, unless otherwise stated, are not insured or guaranteed.

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ROBS arrangements are complex and subject to IRS and Department of Labor requirements. Failure to properly establish or administer the arrangement may result in adverse tax consequences. Ongoing plan administration, reporting, and compliance obligations apply. Investing retirement assets in a privately held business involves substantial risk, including the potential loss of invested principal.

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