The Rollover for Business Startup (ROBS) structure is legally sound when properly implemented through Business Funding Trust, but proper implementation means more than just completing the setup steps correctly. It also means creating and maintaining documentation that demonstrates the legitimacy and compliance of the arrangement — documentation that would hold up to scrutiny in the event of an IRS review. The documentation is part of the normal business setup.
The first layer of documentation is the corporate formation record. This includes your articles of incorporation, corporate bylaws, initial board resolutions, and stock issuance records. These documents establish that the C corporation was properly formed and that shares were issued to the 401(k) plan through a legitimate stock purchase transaction.
What You Need to Know
The second layer is the retirement plan documentation. The 401(k) plan must have a written plan document that satisfies IRS requirements, a trust agreement, and an adoption agreement. These documents define the plan’s terms, eligibility rules, and investment options. They should be updated whenever required by changes in law. These are created by Business Funding Trust at no cost.
Board meeting minutes and corporate resolutions should be maintained on an ongoing basis. These documents show that the corporation is operating as a legitimate entity — holding meetings, making decisions, and recording those decisions appropriately. Support and documents are readily available. Business people everywhere do this not just the ROBS businesses.
Annual Form 5500 filings, payroll records, and plan participant records round out the documentation portfolio. Taken together, this body of documentation tells a coherent story: this is a legitimately structured business, properly funded through a qualified retirement plan investment. Payroll records are readily available from your payroll system.
The goal of documentation is not to create paperwork for its own sake, but to be able to demonstrate clearly and completely that the arrangement was done right.
Ready to Take the Next Step?
Ready to explore whether your 401(k) can fund your entrepreneurial dream? Contact Business Funding Trust today for a free consultation. Our specialists can walk you through your options, help you understand the process, and lead you to a successfully funded business.
