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Small Business Success: ROBS 101

Video Transcription


David Nilssen:

Over the past 12 years we’ve helped 10,000 people across the country to invest nearly three billion dollars into small businesses and franchises establishment using an arrangement called roll over small business startups or ROBS for short. A ROBS is an arrangement that allows people to invest up to 100% of their retirement assets into a small business or franchise without taking a taxable distribution or even getting a loan. It’s a pretty simple process. Now what’s similar to it, if you were to invest in stock and say a probably traded company like Microsoft? That would work because I would send my money to Microsoft and I would get shares as collateral for that investment. They get to keep my money and they to build their empire and as they do well and as the business performs, my investment will rise and fall based on performance.

The same thing is happening in ROBS except instead of investing in a public traded company like Microsoft, we’re investing in our own private organization.

Step one is where you create a corporation and a corporation is going to serve as the business entity how you’re going to operate. And then we create a 401(k) plan for that small business. Once those two have been created we then can roll up to 100% of your existing IRAs or 401(k) or 403(B). Overtime plan into this new 401(k) plan. And that is not taxable. And then from there the 401(k) plan simple invest in the stock of the corporation. The money goes from the 401(k) plan into the corporation and can be used for any ordinary business expense and the 401(k) plan is to hold shares. It becomes a shareholder in the business and the outcome of that investment is based on the business performance.

But the important thing is that they made an investment in small business. That’s equity and not debt. Most small businesses take on a loan which means that they have overhead and interest things to make on a monthly basis. Those that use rollover for business startups can now take the initial cash that the business generates and invest it into the business itself rather than sending off to a bank in the form of interesting payment.

Thousands of people do this every single year. They invest their retirement assets in a small business and if you think starting a business equity instead of that is right for you then I highly encourage you to explore the option of all of rollovers for business startups.

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