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Rollovers for Business Start-ups (ROBS), also known as 401(k) business financing, is a valuable but complex funding option. Because of the complexity, it’s crucial to select a ROBS provider with extensive ROBS experience. Here’s what you should keep in mind when choosing a provider.

Choosing the Right ROBS Provider for You

Choosing the right provider to help you with your Rollovers for Business Start-up (ROBS) transaction might seem overwhelming. But there are vital questions to ask to help that will guide you in your search. By doing your homework early, you can identify the provider that will best support you and your business throughout the ROBS process. Not to pat ourselves on the back, but our experience and level of support are what we at Guidant Financial pride ourselves on as a key difference between other ROBS providers and us.

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Questions You Should Ask Every Potential ROBS Provider Before Making Your Final Decision:

How experienced is your firm?

You want a ROBS provider you can count on to provide accurate and efficient results. While the number of ROBS transactions a provider handles each year is important, it’s not the only sign of experience. It’s helpful to assess a provider’s history to ensure they have a solid reputation. Look for at least a decade of ROBS success. See if the provider is recognized as a leader in the industry – check out what awards and honors they’ve received. The best ROBS providers perform over 1,000 rollovers a year. They’re staffed with subject-matter experts with extensive experience working with entrepreneurs.

Experienced providers will help ensure you meet the five pillars of the ROBS arrangement. They’ll work with legal and tax professionals to minimize the risk of creating taxable events or any other IRS infractions that could result in a taxable distribution.

What are your costs?

You shouldn’t encounter any surprises when working with a ROBS provider, so look for transparency in pricing. It’s good to understand what the pricing includes. Make sure the provider includes audit protection, in-house legal, outside counsel, business valuation, and plan administration services as part of their fee. Most providers charge an initial setup fee of around $5,000. That fee generally includes the creation of your new C corp and 401(k) plan, as well as guidance on completing the rollover itself. Note that ROBS providers don’t roll over the funds for you or have access to your retirement funds at any time during the process. Providers also charge a monthly fee between $100 – $140 for ongoing plan administration. Plan administration includes annual reporting and compliance reviews to make sure your 401(k) is safe from the IRS.

Don’t forget — you get what you pay for. Do you want a provider only to complete the ROBS structure setup, or do you want more support for your business? If you decide to pay less upfront, the cost to your business could be steeper in the end.

What’s your ROBS process and timeline? Can you expedite the process?

A ROBS provider should give you the details of their ROBS process upfront. They should provide a reasonable timeline and have a history of completing transactions on time. A provider should also review state filing timetables and understand how your current 401(k) custodian might affect the timeline. Most rollovers take about four weeks, but an efficient firm can expedite the process if needed.

It might sound enticing when a ROBS provider claims they can complete the ROBS process in 10 days – bust often they can’t follow through. Every ROBS transaction is unique to you, the small business owner. A ROBS provider should respect that by providing individualized support.

Have any of the firm’s ROBS transactions been audited by the DOL or IRS? If so, what was the outcome?

A ROBS provider’s number of 401(k) plan audits is in no way representative of the firm’s reputation – after all, no one controls the IRS! But, a trustworthy provider stands behind their clients in the case of an audit. The provider should pay for their client’s legal representation if an audit does occur. They should also have a spotless audit record – meaning no taxable event has ever occurred as a result of a ROBS arrangement.

While a ROBS provider with no history of audits might sound great, it could actually be a warning sign of inexperience. That’s because naturally, the IRS will audit retirement plans from time to time. You’re likely better off with a ROBS provider who has experienced audits. They understand the process, and their ROBS structure should already be proven sound to the IRS and DOL.

Do You Have Access to External Legal Counsel During the Rollover Process?

Investing part or all your nest egg into a small business is a big decision – and not one to take lightly. Look for a ROBS provider that encourages you to seek outside legal representation who can provide unbiased advice. Better yet, seek a firm that offers this outside counsel as part of their rollover package.

Most firms will offer internal legal counsel. But it’s vital to get an outsider’s opinion. This makes sure you have your bases double-checked with both internal and external representation.

Will They Help You with Ongoing Maintenance of the 401(k) plan?

ROBS requires monthly maintenance to keep your new 401(k) plan compliant with the IRS. Most ROBS providers offer plan administration services. Look for one that employs an in-house plan administration team, an on-site compliance team, and attorneys. In-house teams result in better customer experience, faster response times, and a higher likelihood of catching any issues that could affect IRS compliance.

Many ROBS providers have begun to outsource their plan administration services. While outsourcing helps those providers cut the burden of supporting their client’s plans, it can result in more headaches for you. That’s because the outside firm they outsource your plan to won’t be familiar with your business. It’s important to find a ROBS provider you can trust all the way through the process and the challenges that come with keeping your plan IRS and DOL compliant. You want a provider that doesn’t send you away, but stays by your side through the life of your business.

The 3 Unique Levels of Risk Protection at Guidant Financial

If you choose to work with Guidant Financial as your ROBS provider, you’ll have three levels of risk protection. Our unmatched risk management principles allow us to have the lowest audit rate of any ROBS provider in the industry.

Our Three Levels of Risk Protection:

  • Internal legal counsel from Guidant’s award-winning legal team. Our in-house team of attorneys will help make sure your business meets all the requirements for the ROBS arrangement.
  • Outside Legal Counsel Unbiased representation from a third-party legal expert to verify we got it right. Time with Outside Counsel is included in our initial setup fee.
  • Audit Protection We stand behind our clients 100 percent in the event of an audit of your 401(k) plan. We cover the legal costs for representation. Guidant has a spotless audit record, which means no taxable distribution has ever occurred as a result of our ROBS structure. You can rest assured we’ve got you covered, so you can focus on what’s important – running your business.

The Importance of Trusting Your Gut

The ROBS provider you pick should make you feel confident and secure. They should provide exceptional customer service and be available to answer your questions quickly and thoroughly. You shouldn’t have to deal with aggressive sales tactics or gimmicky videos. Instead, they should educate you on the details of ROBS, so you can make the best choices for your business. The best ROBS provider for you should feel like a great partner for your business – because they are.

Now that you know more about choosing the best ROBS provider for your small business or franchise, you’re one step closer to realizing your dreams – with a company you trust with you all the way.