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No. 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 - your retirement savings become business capital without a taxable event.
Only C-Corporations can issue stock that a 401(k) plan can purchase. This is required by IRC 401(a). LLCs, S-Corps, and sole proprietorships cannot be used in a ROBS structure because the 401(k) plan needs to purchase qualifying employer securities.
Yes. You must be a W-2 employee of the C-Corporation working at least 1,000 hours per year with reasonable compensation. This is not optional - the 401(k) plan must cover eligible employees, and as the founder-employee, that includes you. Compensation must be at market rates for your role and industry, documented through board resolutions.
No. Only pre-tax retirement funds are eligible for ROBS rollover. Roth accounts have already been taxed and cannot be rolled into a traditional 401(k) plan for ROBS purposes.
We recommend at least $50,000 in eligible pre-tax retirement funds. Below this threshold, the setup and ongoing administration costs make ROBS less cost-effective relative to the capital deployed.
Yes. ROBS is commonly used for franchise purchases. The franchise fee is typically a known, documented amount, which actually simplifies the valuation aspect of the transaction compared to business acquisitions.
Yes, but acquisitions require additional scrutiny. An independent appraisal of the existing business is needed to ensure the 401(k) plan pays no more than “adequate consideration” under ERISA 408(e). This is different from a new business, where stock is issued at par value.
No. Under Peek v. Commissioner, a personal guarantee on business debt constitutes an indirect extension of credit between you (a disqualified person) and the plan, which is a prohibited transaction under IRC 4975(c)(1)(B). This would disqualify your entire 401(k) plan - the full balance would be treated as a taxable distribution.
The IRS imposes a 15% excise tax on the amount involved in the prohibited transaction for each year it remains uncorrected. If the transaction is not corrected within the taxable period, an additional 100% tax applies. In the case of IRA-based ROBS, the entire account can be disqualified, making its full value taxable as ordinary income.
Not at formation. Most ROBS startups begin with the founder as sole director - this is normal and standard. Independent board members are a best practice for mature companies but are not an IRS requirement. The key requirement is that compensation decisions are documented and reasonable, not that they are approved by independent third parties.
Form 5500 is an annual filing required by the Department of Labor for 401(k) plans with assets. If your ROBS plan holds any assets (which it will - the C-Corp stock), you must file. Talcott Forge provides Form 5500 filing support as part of ongoing administration.
Yes. Once your business is funded, you can use the “Raise Additional Capital” feature in your dashboard to submit investor details - name, email, investment amount, and price per share. You can add a single investor or enter multiple investors at once. Your TFC concierge team is notified automatically and can initiate the stock purchase workflow on your behalf.
In a ROBS structure, the 401(k) plan trust is the legal owner of the C-Corp shares. This is the required structure under ERISA - the plan must purchase the shares directly in order for the transaction to qualify as an exempt purchase of qualifying employer securities. As long as you remain an active plan participant, these shares represent your beneficial ownership in the corporation. You direct the trust’s investment decisions in your capacity as Plan Administrator.
Not simultaneously. ROBS and Solo 401(k) are mutually exclusive. ROBS uses a company-sponsored 401(k) for a C-Corporation with employees; Solo 401(k) is for self-employed individuals with no full-time employees. You cannot have both.
You can start the ROBS process while still employed elsewhere, but you must commit to working full-time in the new business. If your current employer’s 401(k) doesn’t allow in-service rollovers, you may need to wait until you separate from that employer to roll over those specific funds.
Yes. The ROBS 401(k) plan trust is a separate legal entity from your C-Corporation, and it requires its own Employer Identification Number. Talcott Forge obtains the plan trust EIN from the IRS as part of plan setup. The C-Corp EIN and the plan trust EIN are both reported on your annual Form 5500 filing.
No. The initial intake only asks whether you have a U.S. Social Security Number (Yes or No). Your full SSN is collected later, and only when it’s required for a specific filing: your C-Corp’s EIN application, your Fidelity custodian account, or the plan trust EIN. Wherever possible, we encrypt your SSN and discard it after the filing is complete.

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