Let’s start with what it isn’t: a ROBS isn’t a withdrawal from your retirement account or a loan against it. (We’ll talk more about those options later.) Instead, funds are rolled into a new retirement account which buys shares into your corporation — in essence, that new plan becomes the owner of your business.
So in order to make use of a ROBS plan, you first need an incorporated business. Corporations – specifically C corporations – are the sole businesses eligible to participate in ROBS because they have the ability to sell stock.
Once your C corp has set up a qualified retirement plan, you would roll over your existing retirement funds. The ROBS plan then allows the new retirement account to buy shares in your corporation, freeing up money your business needs to operate. In other words, the proceeds from the sale of stock could be used as working capital.
We’ll walk you through the steps a bit later in this story.