By: Bryan Uecker, QPA, QPFC, AIF, AIFA

Self-directed IRAs and BORSA/ROBS (Rollovers for Business Start-ups) offer distinct approaches to investing in businesses:

Business Involvement

BORSA/ROBS: Requires active participation in business operations, including receiving a salary if deemed reasonable. Structured through a C corporation, which is the sponsor of the retirement plan.

Self-directed IRAs: Passive investment vehicles where IRA owners cannot engage in business management or take salaries. Doing so could violate IRS rules on prohibited transactions.

Tax Considerations

BORSA/ROBS: Subject to regular corporate taxes; UBIT (Unrelated Business Income Tax) does not apply since the C corporation is taxable.

Self-directed IRAs: Income from business activities may trigger UBIT if unrelated to the IRA’s tax-exempt purpose.

Loan Guarantees

BORSA/ROBS: Allows funds to be used as a down payment for business loans, including SBA loans.

Self-directed IRAs: Cannot guarantee loans, maintaining separation between IRA assets and personal liabilities.

Ownership Flexibility

BORSA/ROBS: Enables up to 100% ownership of the business, providing full control.

Self-directed IRAs: Direct ownership risks violating IRA rules if exceeding certain ownership thresholds, jeopardizing tax benefits.

Conclusion: Self-directed IRAs are ideal for passive investors seeking hands-off involvement, while ROBS empowers owners with direct control and tax advantages through a C corporation setup.

A Persuasive Essay on the Benefits of the ROBS Strategy

By: Eva Jiang, M.B.A., M.S.

Recently, DRDA hosted an enlightening webinar titled “Unlocking Success: Navigating the ROBS Journey,” aiming to demystify the ROBS (Rollover as Business Start-up) strategy for aspiring entrepreneurs. This essay argues that the ROBS strategy offers a unique and advantageous pathway for individuals to leverage their retirement funds to start or buy a business without incurring taxes or penalties. The webinar provided an in-depth exploration of the ROBS strategy, addressing common concerns and illustrating its potential benefits.

Setting the Stage for Success

The webinar began with the foundational steps necessary to ensure a distraction-free environment, emphasizing the importance of focused attention when dealing with complex financial strategies. Attendees were encouraged to silence their phones and find a quiet place, setting the stage for a productive session. The introduction of the Q&A chat box underscored the interactive nature of the webinar, allowing participants to engage directly with the experts, thereby enhancing their understanding of the ROBS strategy.

Expert Insights and Comprehensive Understanding

The session featured two distinguished speakers: Doug Dickey, a Partner at DRDA with credentials such as CPA, CVGA, and CEPA, and Bryan Uecker, the Retirement Plan Manager with qualifications including QPA, QPFC, AIF, and AIFA. Their combined expertise provided a thorough and reliable foundation for understanding the ROBS strategy. This high level of expertise is crucial for individuals considering using their retirement funds to invest in a business, as it ensures that they receive accurate and comprehensive information.

The Mechanics of the ROBS Strategy

Doug and Bryan explained the ROBS strategy in detail, highlighting its core components: forming a C Corporation, establishing a 401(k) Profit Sharing Plan, and rolling over retirement funds into this plan to invest in a new business. This approach allows individuals to use their retirement funds without incurring the taxes and penalties typically associated with early withdrawals. The ROBS strategy thus provides a viable and advantageous option for entrepreneurs who lack sufficient liquid capital but possess substantial retirement savings.

Addressing Common Concerns

A significant portion of the webinar was dedicated to addressing common concerns and questions from the attendees. These included:

Compliance with IRS Regulations: Ensuring compliance with IRS regulations is a primary concern for anyone considering the ROBS strategy. The speakers provided detailed guidance on meeting all necessary requirements, emphasizing the importance of adherence to avoid legal complications.

Eligible Retirement Funds: The types of retirement funds that qualify for ROBS were clarified, providing attendees with a clear understanding of their eligibility.

Tax Benefits: The tax advantages of operating under a C Corporation structure were highlighted, showing how the ROBS strategy can lead to significant tax savings.

Exit Strategy Costs: Insights into the expected costs of an exit strategy were shared, helping attendees plan for the future and understand the long-term financial implications of their investment.

The Value of Personalized Consultation

As the webinar concluded, DRDA offered attendees an exclusive opportunity for a complimentary one-hour consultation. This personalized advice is invaluable for individuals seeking to tailor the ROBS strategy to their specific circumstances. Such consultations can address unique challenges and provide customized solutions, further enhancing the appeal of the ROBS strategy.

Stay Connected

For those with additional questions, the speakers provided direct contact details. Bryan’s email and phone number were shared, along with a link to schedule a consultation. “We’re here to help you on your journey,” Doug assured, his sincerity resonating through the screen.

Bryan Uecker: bryan.uecker@drdacpa.com | 281-954-6004

Schedule a Consultation: Complimentary One-Hour Consultation

Final Thoughts

As the webinar concluded, there was a sense of accomplishment and excitement. The attendees had gained valuable insights into the ROBS journey, feeling more empowered to take the next steps in their entrepreneurial endeavors. The DRDA team was grateful for the opportunity to share their expertise and looked forward to continuing to support these aspiring business owners.

Thank you to all who joined us. Stay tuned for more from DRDA as we continue to help unlock success in entrepreneurial journeys.