The Best Rollover for Business Startups (ROBS) Providers

Use your retirement savings, tax free, to start a business

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A rollover for business startups (ROBS) is a tax-free way to invest funds from your retirement account into your new business without incurring any early withdrawal fees. Unlike other funding options, a ROBS is not a loan so you aren’t leveraging your business as you’re trying to get off the ground. You won’t have to make payments or personally guarantee anything to get access to the money, but you do need to make sure you set it up correctly with an experienced company. 

Normally, removing money from your 401(k) or retirement account is very expensive. If you’re younger than 59½, then you’ll likely incur a 10% withdrawal penalty. Plus, you’ll incur taxes that you might not have to pay if you wait. This could mean that you’re only receiving 60% of the total cash value you have in your account. 

Luckily, using a ROBS allows you to get access to that capital tax- and penalty-free so you can buy or start a business. We looked at more than a dozen of the top ROBS companies and evaluated each based on costs, experience and expertise, additional financing options, and customer satisfaction. Here are our top choices. 

The 7 Best ROBS Companies of 2020

Best Overall: FranFund

FranFund

 FranFund

The majority of ROBS transactions (typically more than 70%) are to purchase or start a franchise. We chose FranFund as the best overall because it is the most experienced ROBS company to help franchises get off of the ground. It also has solid customer reviews that highlight the company’s ongoing support. FranFund is an affordable solution that provides you the expertise of helping franchises in all industries get off the ground successfully. 

Here’s a more detailed breakdown of FranFund: 

  • Setup Fee: $4,795
  • Ongoing Fees: $130 per month for 10 employees or less
  • Ongoing Support: Audit support, plan eligibility tracking and notification, IRS 5500 filing
  • Additional Financing Offered: Network of SBA and traditional loan providers
  • Industry or Business Speciality: Franchises

Best for Guaranteed Audit Support: Guidant Financial

Guidant Financial

 Guidant Financial

Guidant is an experienced ROBS provider that has completed more than 10,000 transactions. It is another very strong option and the only ROBS company that automatically offers free outside counsel to help you during an audit, which is why we chose it as our best for guaranteed audit support. If you’re most worried about compliance and what happens if you happen to get audited, then Guidant is the best option for you. 

Here’s what Guidant offers: 

  • Setup Fee: $4,995
  • Ongoing Fees: $139 per month
  • Ongoing Support: Same as FranFund but they guarantee in their contract to give you outside counsel help during an audit
  • Additional Financing Offered: SBA loans, unsecured loans, portfolio loans
  • Industry or Business Speciality: None

Most Established ROBS Company: Benetrends

Benetrends

 Benetrends

Benetrends is one of the original competitors in the ROBS space and has been completing transactions since 1983. If you’re looking for the most experienced company then this is your best fit. There likely isn’t a ROBS situation that the company hasn’t dealt with in the past and would be an excellent choice to complete the transaction with. If you’re worried about being in compliance and want the most experienced company to handle your ROBS transaction then Benetrends is a great option.

Here are the details:

  • Setup Fee: $4,995
  • Ongoing Fees: $130 per month
  • Ongoing Support: Audit help, plan qualifications and notification, 5500 form filing
  • Additional Financing Offered: SBA loans, traditional loans, equipment leasing
  • Industry or Business Speciality: None

Best for Buying a Business: CatchFire Funding

Catchfire Funding

 Catchfire Funding

CatchFire offers assistance in helping you find the right business to invest in if you haven’t already identified what you want to do. CatchFire is best for entrepreneurs that know they want to buy a business but don’t know what business yet. The company will not only help you set up a ROBS but will also walk you through the whole process of buying a business and make sure you find the right fit. 

CatchFire’s offerings include:

  • Setup Fee: About $5,000 per month
  • Ongoing Fees: Depends on each individual business situation
  • Ongoing Support: 5500 form filing
  • Additional Financing Offered: SBA loans
  • Industry or Business Speciality: Finding new business opportunities

Most Affordable Setup Fees: My Solo 401k

MySolo401k

 MySolo401k

My Solo 401k is the best option if you’re just looking to set up a ROBS without breaking the bank. It has the lowest initial setup fee of any company on our list, and they also offer a free year of ongoing or monitoring. All the options on this list can provide you with a strong experience, so choosing the most affordable option can often be the best fit. 

Here’s a more detailed breakdown:

  • Setup Fee: $4,000
  • Ongoing Fees: $899 annually ($74.92 per month), $75 annually for each additional employee over 10, free in year one
  • Ongoing Support: Audit support, plan eligibility tracking and notification, IRS 5500 filing
  • Additional Financing Offered: None
  • Industry or Business Speciality: None

Best for Businesses Without Employees: Business Funding Trust

Business Funding Trust

 Business Funding Trust

Business Funding Trust (BFT) is a good option if you plan on being the only employee of your newly formed business. While BFT has a strong ROBS offering, it doesn't have all of the ongoing service options of the other companies, meaning it becomes more burdensome for you to manage with BFT if you have employees. But, if your new business isn't going to use outside employees, it's a great option.

Here’s a more detailed breakdown of Business Funding Trust:

  • Setup Fee: $4,950
  • Ongoing Fees: $300 annually per IRS 5500 form
  • Ongoing Support: IRS 5500 form filing
  • Additional Financing Offered: None
  • Industry or Business Speciality: Small businesses with no employees

Best for Other Financing Options: Pango Financial

Pango Financial

 Pango Financial

If you’re looking to combine a ROBS transaction with another form of financing, then Pango Financial might be the best fit for you. The company's representatives are experienced at combining the different financing sources together to complete your business purchase. And, even if Pango doesn’t have the financing options you’re looking for, they’ll help you find something that works. 

Here are the details on Pango:

  • Setup Fee: $3,995
  • Ongoing Fees: $110 per month
  • Ongoing Support: Filing of IRS 5500 form, compliance testing, plan eligibility tracking and notifications
  • Additional Financing Offered: All traditional financing options
  • Industry or Business Speciality: Businesses needing additional financing

What Is a ROBS?

A rollover for business startups (ROBS) is a way to invest your retirement savings into your business without incurring the normal withdrawal fees or taxes that you’d be charged if you are younger than your normal withdrawal age (typically 59½ years of age). A ROBS is not a withdrawal or loan against your retirement account so there are no payments or penalties. 

This is a great way to invest funds that you have tied up into a business you’re starting because you won’t have to make loan payments or give up ownership interests, which most other financing options would require. In fact, businesses that use a ROBS to start their business have a survival rate of more than twice that of businesses using traditional business loans. 

How Do ROBS Work?

In order to use a ROBS, your business must be registered as a C Corporation. This is because the IRS prohibits transactions involving employer securities that would make a ROBS illegal in any other organizational structure. When you invest funds from your retirement account into your new business, your personal retirement account actually purchases stock in your new business and the account has all the rights of any other shareholder. 

The steps to set up a ROBS are: 

  1. Form a C Corporation that owns the assets of your new business.
  2. Create a qualifying retirement account for your new C Corporation, giving all owners and potential employees access to be a part of the plan. 
  3. Transfer funds from your personal retirement account into the newly created retirement plan. 
  4. The new retirement plan then purchases stock in your C Corporation, giving your business the funds.

Once these steps are complete, the business can use the funds received from the sale of stock for any business purchase or need. Funding typically takes about two to three weeks. 

Who Can Use a ROBS?

Technically, anyone can use a ROBS to fund their business but these are highly regulated and there are rules and restrictions that you must abide by in order for the transaction to qualify as an event that doesn’t cost you taxes or withdrawal fees. The main requirements are: 

  • Have $50,000+ in retirement funds to roll over. While this isn’t a legal requirement, most ROBS providers won’t work with you otherwise because the fees don’t make it worth the cost if you have much less than this. 
  • The retirement account you’re using can’t be from your current employer. 
  • You must be using funds from a qualifying retirement account, such as: 401(k), 403(b), SEP, TSP, Keogh, Traditional IRA. Note that Roth accounts do not qualify for a ROBS. 
  • You must be a legitimate employee of the new business, meaning you must have work that you do in the course of a normal workweek. You can’t be an absentee owner, and a ROBS isn’t a good fit for passive income businesses. 

Additionally, there are a few restrictions once you use a ROBS to fund your business. You can’t use the funds to buy business property that you or your family members use personally. You also cannot pay yourself an unfair salary or other compensation benefits that are not market for the position you’re fulfilling in the new business. You also can’t pay broker or advisory fees to yourself or others out of the funds that you roll over. 

How Much Does a ROBS Cost?

A typical ROBS transaction costs about $5,000 as a one-time fee to set up the ROBS and then $130 per month to maintain it, depending on the company you choose. There might also be additional ongoing fees per employee in the business if you have more than 10 employees. The ongoing fees cover the costs of notifying (and keeping track of) newly eligible employees on the plan as well as the annual filing of required IRS forms. Some ROBS companies will charge you the fee on an annual basis instead of having you pay monthly. 

When Is a ROBS Worth the Cost?

A ROBS is typically worth the cost if you meet the minimum requirements and you’re confident in the potential success of your business. While a ROBS provides more financial flexibility and freedom than traditional business loans, you’re putting your retirement funds at risk. If the business fails, then your funds are gone. If you can live with that risk, then a ROBS is a great option that lowers the risk for your business. 

Carol Tompkins of AccountsPortal, who works with numerous accountants on business transactions, provided some insight as to when she thinks it could be worth the cost: 

“If you have poor credit, or are concerned that you might not qualify for a business loan, then ROBS financing could be a good option. In addition, if your business will not be able to pay the interest on a business loan, especially in the first year of operations, then ROBS can also be considered a good idea.” 

How We Chose the Best ROBS Companies 

To find the best ROBS companies, we evaluated over a dozen leading providers. We looked at each based on expertise and years in business, costs, audit and legal protection, and general ability to help fund businesses across numerous industries. We took all of these things into consideration when reviewing companies and narrowed the list down to those best positioned to help entrepreneurs buy or fund a business.