A Rollovers as Business Start-ups (ROBS) strategy for starting or buying a business has numerous benefits, including ready access to cash flow and tax advantages. In addition, a ROBS strategy offers attractive asset protection benefits.
A ROBS strategy involves using money from a 401(k) plan to invest in an operating company or a startup company, specifically a C-corporation. By taking equity built up in a 401(k) and rolling it over into a new business, the owner doesn’t need to take on debt.
Asset Protection with ROBS
Unlike other sources of business capital that can create liabilities for the owner, a ROBS strategy helps protect the owner’s personal assets because:
- No personal collateral is needed. Owners can secure business funding without risking personal assets or property.
- It reduces financial stress. The debt-free financing available through the ROBS strategy helps reduce financial stress and operational overhead, making it easier for business owners to focus their efforts on expansion.
- It creates enhanced cash flow. The ROBS strategy is beneficial because it eliminates interest payments, allowing more cash flow to be reinvested into the business and enhancing the overall financial health of the company.
- Business growth is prioritized. Because ROBS is not a loan or debt product, owners can allocate more resources to business expansion without the burden of loan repayments, which can stifle growth.
In conclusion, because the ROBS strategy uses equity from a 401(k) plan rather than taking on new debt, owners have a significant advantage for business growth. In addition, because no personal collateral is needed, a ROBS strategy offers significant asset protection features.
As an experienced Certified Public Accountant (CPA) firm that understands the business advisory space, S.J. Gorowitz Tax and Accounting Services would be pleased to offer you a consultation on the benefits of a ROBS strategy for your business plans and objectives. Please contact us at 770.740.0797 or email info2@SJGorowitz.com.
