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ROBS Basics

ROBS stands for Rollover for Business Startups. It lets a 401(k) plan invest in the stock of the company that sponsors it. In practice: you form a C-Corporation, the corporation sponsors a new 401(k) plan, eligible retirement funds roll into that plan, the plan buys C-Corp stock, and capital moves into the business without income tax, early-withdrawal penalties, debt, or outside equity dilution.
No, not when the rollover is done correctly. The rollover from your existing retirement account to the new 401(k) plan is a trustee-to-trustee transfer. No taxes are triggered and no early withdrawal penalties apply. This is the core advantage of ROBS: retirement savings become business capital without a taxable event.
Only C-Corporations can issue stock that a 401(k) plan can purchase for a ROBS structure. LLCs, S-Corps, and sole proprietorships cannot be used because the 401(k) plan needs to buy qualifying employer securities.
Potentially, yes. ROBS requires a C-Corporation, which is also the entity type required for Qualified Small Business Stock treatment. QSBS eligibility depends on the company, the stock issuance, the business activities, the gross-asset limits, the holding period, and the taxpayer claiming the exclusion. ROBS does not automatically make stock QSBS-eligible.

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Eligibility

Pre-tax retirement accounts are the usual fit: prior-employer 401(k), traditional IRA, SEP IRA, SIMPLE IRA after the required waiting period, and similar qualified plans. Roth funds generally do not work for a standard ROBS structure because they have already been taxed and cannot be rolled into the new pre-tax 401(k) plan for ROBS purposes.
ROBS generally works for U.S. founders who have eligible pre-tax retirement funds, are forming or buying a business through a C-Corporation, and will work as a bona fide employee of that corporation. It is not a passive investment structure.
We generally recommend at least $50,000 in eligible pre-tax retirement funds. Below this threshold, setup and ongoing administration costs can become less efficient relative to the capital deployed.
You can start the ROBS process while still employed elsewhere, but you must be planning to work in the new business. If your current employer’s 401(k) does not allow in-service rollovers, you may need to wait until you separate from that employer to roll over those specific funds.
No. The initial intake only asks whether you have a U.S. Social Security Number. Your full SSN is collected later, and only when required for a specific filing such as a C-Corp EIN application, custodian account, or plan trust EIN. Wherever possible, Nexus encrypts sensitive identifiers and discards them after the filing is complete.

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Setup and Funding

A typical Nexus 401(k) setup takes 2-4 weeks from completed intake to funded business when filings and custodian processing move on standard timelines. Fast, straightforward cases can finish in 2-3 weeks. The biggest variables are state filing speed, custodian rollover processing, and whether additional documentation is needed.
Nexus coordinates the core ROBS setup path: C-Corp formation, corporate governance setup, plan and trust setup, rollover coordination, capitalization support, and standard post-funding administration. You still operate the business and remain responsible for business decisions, plan fiduciary duties, and accurate information.
Yes. ROBS is commonly used for franchise purchases. The franchise fee is typically a known, documented amount, which can simplify the valuation and use-of-proceeds analysis compared with some acquisitions.
Yes, but acquisitions require additional scrutiny. An independent appraisal or valuation support may be needed to show that the 401(k) plan paid no more than adequate consideration for the C-Corp stock and that business funds were used properly.
Generally, no. A personal guarantee on business debt can create a prohibited transaction because it may be treated as an indirect extension of credit between you and the plan. This is one of the most important ROBS compliance issues to avoid.

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Compliance and Administration

Yes. You need to be a bona fide W-2 employee of the C-Corporation, working in the business and receiving reasonable compensation for your role. Compensation should be documented and consistent with market rates for the work being performed.
Once the company has employees, the 401(k) plan has to be administered like a real employee benefit plan. That can include eligibility tracking, plan notices, contributions, nondiscrimination testing, and proper treatment of employees who become eligible to participate.
Form 5500 is an annual filing required by the Department of Labor and IRS for employee benefit plans. A ROBS plan generally files because the plan holds assets, including C-Corp stock. Nexus includes annual filing support as part of ongoing administration.
Yes. The ROBS 401(k) plan trust is a separate legal entity from the C-Corporation and requires its own Employer Identification Number. Nexus obtains the plan trust EIN from the IRS as part of plan setup.
In a ROBS structure, the 401(k) plan trust is the legal owner of the C-Corp shares. The plan purchases the shares directly so the transaction can qualify as a plan investment in employer securities. You do not personally buy the shares with retirement funds.
Not at formation. Most ROBS startups begin with the founder as sole director. Independent directors can be useful as a company matures, but the core requirement is that decisions are documented, reasonable, and consistent with fiduciary and corporate obligations.
Prohibited transactions can create excise taxes, plan correction requirements, or worse outcomes depending on the facts. Common issues include personal guarantees, using plan assets for personal benefit, improper compensation, and transactions between the plan and disqualified persons. If you suspect an issue, address it quickly with qualified counsel or a plan professional.
Not for the same operating company in the ordinary ROBS setup. ROBS uses a company-sponsored 401(k) plan for a C-Corporation. A Solo 401(k) is designed for self-employed individuals with no eligible non-spouse employees. The structures serve different purposes and should not be layered casually.

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Business Outcomes

The 401(k) plan owns C-Corp stock, so business failure can reduce or eliminate the value of that plan asset. That is an investment loss inside the retirement plan, not a taxable distribution by itself. The company and plan still need to be wound down correctly.
If the C-Corp is sold, the 401(k) plan receives its share of sale proceeds based on the stock it owns. Those proceeds remain inside the plan until distributed or rolled over according to retirement-plan rules.

Check Your Eligibility

Start with the eligibility screening.