How ROBS Works
Form a C-Corporation
You create a new C-Corporation. This entity type is required because only C-Corps can issue stock that a 401(k) plan can purchase. This is mandated by IRC 401(a).
Establish a 401(k) Plan
The C-Corporation adopts a 401(k) plan that permits investment in employer stock (the company’s own shares).
Roll Over Retirement Funds
You roll over funds from your existing retirement account (Traditional 401(k), Rollover IRA, SEP-IRA, etc.) into the new company’s 401(k) plan. This is a trustee-to-trustee transfer - no taxes are triggered.
Purchase Company Stock
The 401(k) plan uses the rolled-over funds to purchase stock in the C-Corporation at the documented transaction value.
Is ROBS Legal?
Yes. ROBS is explicitly permitted under IRC 4975(d)(13) and ERISA 408(e), which exempt the acquisition of qualifying employer securities by an eligible individual account plan when done for adequate consideration and without commission. The IRS does not prohibit ROBS - in fact, the IRS published examination guidance in Memo 2008-01-021 specifically for how to audit ROBS transactions, which acknowledges the structure as a recognized planning strategy.Who is ROBS For?
ROBS is designed for founders who:- Have $50,000 or more in eligible pre-tax retirement savings
- Plan to be a working owner and employee of the new business
- Are starting a new business, buying an existing one, or purchasing a franchise
- Want capital without taking on debt or diluting ownership
Where Nexus Fits
ROBS is not just a funding mechanism. It creates an operating structure with a C-Corporation, a company-sponsored 401(k) plan, plan trust assets, corporate governance, and annual administration requirements. Nexus handles the setup work and standard ongoing administration: C-Corp formation, 401(k) plan and trust setup, rollover coordination, capitalization support, compliance deadline tracking, annual filing support, required plan maintenance, valuation coordination, and entity administration support.Talcott Forge prepares, coordinates, and administers key parts of the structure. The founder remains responsible for operating the business as a working owner, making fiduciary decisions prudently, maintaining proper separation between personal, corporate, and plan assets, keeping the corporation in good standing, and avoiding prohibited transactions.
ROBS vs. Other Funding Options
| Method | Tax Impact | Debt? | Equity Dilution? | Speed |
|---|---|---|---|---|
| ROBS | None (tax-free rollover) | No | No | 2–4 weeks typical |
| Early 401(k) withdrawal | 10% penalty + income tax | No | No | 1–2 weeks |
| SBA loan | None | Yes (repayment) | No | 4–12 weeks |
| Angel/VC | None | No | Yes (significant) | Months |
| Personal savings | None | No | No | Immediate |
Check Eligibility
See if you qualify for ROBS
View the Process
Review the detailed customer flow