> ## Documentation Index
> Fetch the complete documentation index at: https://docs.talcottforge.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Compliance Overview
> Understanding ROBS compliance requirements and how Nexus supports ongoing administration.
Running a ROBS-funded business means running a 401(k) plan. That comes with real compliance obligations under the **Internal Revenue Code (IRC)** and **ERISA**, and violations carry steep financial penalties. Ongoing administration is part of the product, not an afterthought.
## 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 | **\$250/day** penalty, up to \$150,000 |
The IRS Employee Plans Compliance Unit actively audits ROBS transactions using examination guidance from **IRS Memo 2008-01-021**. Compliance is not something to figure out after the fact.
## Your Compliance Obligations
### At Formation
* C-Corporation properly formed and in good standing
* 401(k) plan documents properly adopted
* Stock issued at adequate consideration based on the documented valuation and capitalization structure
* 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
* **Plan administration records** - maintain employee service records, contribution records, corporate actions, and plan activity records
* **Employee notices and participation** - determine eligibility under the plan, notify newly eligible employees, distribute required notices and Summary Annual Reports, and deposit any plan contributions within required timeframes
* **Material-change notices** - tell Talcott Forge before major changes that may affect the plan, including ownership changes, business acquisitions or sales, plan mergers or terminations, or IRS/DOL inquiries
### What Nexus Supports
Nexus supports standard plan and entity administration after funding, including compliance deadline tracking, annual filing support, required plan maintenance, valuation coordination, and entity administration support.
Nexus supports the administration workflow, but the founder and Plan Sponsor remain responsible for fiduciary and operating decisions. You are responsible for making prudent decisions, documenting governance actions, maintaining separation between personal, corporate, and plan assets, keeping the corporation in good standing, and avoiding prohibited transactions.
## Not Included in Ongoing Administration
Nexus ongoing administration does not include legal, tax, or accounting advice; tax return preparation; payroll, deferral processing, or contribution remittance; distribution processing; hardship withdrawals; required minimum distributions; plan loans; QDRO administration; custody of plan assets; investment management; audits or proceedings beyond document production support; or plan winddown.
What you can and cannot do
Annual filing requirements
What courts have ruled
Key terms defined