Compliance Overview
Operating a ROBS-funded business comes with compliance obligations under both the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA). These aren’t optional — violations carry steep financial penalties.Why Compliance Matters
| Violation | Penalty |
|---|---|
| Prohibited transaction (IRC 4975) | 15% excise tax on the amount involved, per year |
| Uncorrected prohibited transaction | Additional 100% tax on the amount involved |
| IRA disqualification (IRC 408(e)(2)) | Entire account balance treated as taxable distribution |
| Late Form 5500 filing | **150,000 |
Your Compliance Obligations
At Formation
- C-Corporation properly formed and in good standing
- 401(k) plan documents properly adopted
- Stock issued at adequate consideration (par value for new businesses)
- Rollover processed as trustee-to-trustee transfer
Ongoing
- Annual Form 5500 filing — required for all 401(k) plans with assets
- Annual plan valuation — fair market value of plan assets including C-Corp stock
- Reasonable compensation — your salary must be at market rate, documented by board resolution
- No prohibited transactions — quarterly self-audit recommended
- Corporate governance — maintain meeting minutes, document major decisions
What Talcott Forge Handles
- Compliance deadline tracking and reminders
- Form 5500 data collection and filing support
- Quarterly prohibited transaction review
- Document generation for governance actions
- Cap table maintenance and valuation tracking