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CPA Accountant discusses ROBS setup in 2018 | Rollover Business Startups | Tax Form 5500 instructions

ROBS CPA accountant C Corporation

ROBS allows you to use your self-directed pension plan to capitalize a C Corporation. Need a free consult with an experienced ROBS CPA? Call me. (910) 399-2705.

Most CPA accountants don’t deal with ROBS (Rollover Business Startups). Why? The IRS threatened to audit all ROBS C Corporations. That stems form a 2008 IRS directive which doesn’t seem to be true going into 2018 for the 2017 tax season. I’ll provide answers to the most common ROBS FAQs also also give some tips to augment the Form 5500 instructions.

ROBS allows you to finance your own C Corporation tax free with your existing pension plan funds. So, since there is often no startup capital to service, ROBS C Corporations allow better cash flow. Cash flow issues are the biggest component in small business failures.

I handle ROBS clients. Why? My blog draws enough ROBS Clients that it paid for me to become proficient in all aspects of ROBS setup and C Corporation maintenance. So, in my experience, most local CPAs won’t handle a ROBS C Corporation for a few reasons:

  • The learning curve is too steep.
  • They might never even come across a ROBS potential client.
  • ROBS sometimes gets bad press from the IRS.
    • The IRS usually publishes only what it doesn’t like with ROBS, leaving a gray area on what they do like. That scares non ROBS CPAs.
  • My guess is that you’d have to go to a large CPA firm to a find a ROBS CPA. Guidant, one of the two top ROBS setup providers, refers to only 11 ROBS CPAs and tax attorneys for tax preparation and accounting services. And yes, I’m one of them.

Simplistic, General Overview of ROBS setup:

  • Client has funds trapped in a pension plan and wants to start-up a company, buy an existing company or purchase a franchise.
    • This pension plan can’t be used if you’re still employed with the underlying company.
    • In the Recession, unemployed folks started their own companies out of necessity.
    • Now, lots of Folks are sick of their job and want to be their own boss.
  • Usually the new business is a franchise.
    • But now that’s changing too.
    • I get calls from potential ROBS Clients who want to create a new company from scratch or buying an existing company.
  • During the Recession, typically, the ROBS client was a high-paid employee who got downsized.
    • But again, as ROBS became more known (read the Newsweek article quoting me – link is in the right sidebar), some Folks want to be their own boss and believe they can do better financially and be happier running their own business, which by the way allows them to optimize their pension plan, (another reason that ROBS clients do well).
  • The ROBS technique avoids all taxation on otherwise early distribution of pension finds. Very cool tax loophole.
    • But you have to be careful to stay in ROBS IRS compliance.
  • Otherwise early distribution of pension funds incurs immediate federal and State income tax plus an extra 10% additional tax. That’s just some double speak; the extra 10% is a penalty. So, maybe 40% of the pension plan distribution goes to the IRS. Plus maybe another 7% +/- to your State. Ouch.
    • That’s not a problem with the ROBS technique. And yes, that’s a big deal.
  • Your ROBS CPA helps you through pre ROBS planning, like helping you collect startup expenses, to post ROBS transactions and C Corporation tax compliance. A ROBS CPA is not responsible for the ROBS setup,
  • The ROBS CPA doesn’t actually do the ROBS setup because opening a C Corporation is supposedly practicing law.
    • As part of your due diligence I suggest calling Guidant and Benetrends as part of due diligence.
    • I’ve read lots of ROBS setup documents from various “come and go providers” and both Benetrends and Guidant are worth a call. But again, I’m not an attorney.
    • Benetrends covers a few IRS hot ROBS issues other companies don’t. Here’s the telephone number of Larry Carnell, VP: (770) 652-5393.
    • Here’s Jorden Stefnik’s telephone number at Guidant: (425) 326-4602.
  • The ROBS setup provider establishes a pre approved ERISA retirement plan.
    • Note ROBS providers sometimes cite a Determination Letter from the IRS as a service but since the Department of Labor has pre-approved the plan, the Determination Letter is assured.
  • The ROBS client rolls over the existing pension funds into the new, self-directed pension plan.
  • The ROBS Client then directs the pension plan rollover to buy 95-98% of the new C Corporation’s stock.
    • Note Benetrends has a different perspective. They allow you to reimburse yourself their fee from the new C Corporation funds.
    • So the new 410(k) masterplan owns 100% of the stock.
  • The ROBS C Corporation quickly (sorta kinda) buys the assets the new company needs.
  • The ROBS setup technique neatly avoids all taxation and penalties for early withdrawal of pension plan funds, but you have to follow the IRS rules and avoid prohibited transactions.

Background on non-ROBS Self Directed IRA:

Folks got tired of flat line retirement fund performance by external managers. Some thought they could do better managing it themselves. The IRS allows self-directed retirement accounts. Predictably, issues arose over acceptable investments and prohibited transactions. The underlying conceptual framework for IRS policy on self-directed IRAs? Pension funds haven’t been taxed yet and are intended for retirement.

Some tips I’ve learned over the years as a ROBS CPA

  • Some Folks want to use the ROBS method but find it’s not cost-effective.
    • Your ROBS CPA should help you with that. Call me.
    • As your CPA I calculate whether ROBS is cost effective as one of the first steps in the ROBS setup process.
  • A good business plan is essential.
    • Especially the cash flow projections.
    • I won’t take you as a Client unless you’ve done your homework; I only accept ROBS clients who I believe will succeed.
    • Note that ROBS companies stand a better chance of being successful.
    • Why? You don’t have the typical startup debt to service, helping you make the business work in the crucial first year.
  • The IRS audit rate is about 0.4%. But that’s based on hearsay.
    • I’ve never had a Client audited.
    • Sometimes I take on existing ROBS clients whose financial records, corporate minutes, etc., are so bad, that the IRS should shut them down. But they don’t.
    • If the ROBS setup is incorrect it can cost $10,000+ to correct it.
  • The ROBS setup technique requires a squeaky clean set of books.
    • One of the nice features of having a ROBS CPA is help on setting up the books and keeping Corporate minutes.
    • I like to turn the financial info into managerial tools.
  • I’m told by other ROBS setup folks that disproportionate pension plans are the most common ROBS prohibited transaction they see.
    • Your ROBS CPA and setup provider can help minimize this ROBS requirement. It depends on the type of business you run.
      • Guidant and Benetrends can address this issue as well.
    • Using part-time help and subcontractors (when appropriate) are two examples of avoiding the ROBS pension plan guidelines.
    • You must clearly communicate the pension plan parameters to employees. And document you’ve done so.
  • The ROBS C Corporation can also pay your healthcare costs directly from the business. This a huge big deal. But you have to treat all full time employees the same way.
  • Track entity transactions (money passing to or from you and the C Corporation) carefully.
  • Your salary has to be justified.
    • The IRS uses multiple parameters to determine what your salary should be.
      • That’s a nice problem, being successful, but still a problem.
    • Your ROBS CPA can help with that.
    • This salary decision is a clear example of what Corporate minutes should document.
    • Note Benetrends “allows” a salary before the ROBS C Corporation has revenue but the Guidan’t plan does not.
  • Once the self-directed rollover funds are in place, buy whatever your company needs to do business quickly.
  • The hostile Technical Memorandum dated October 1, 2008 doesn’t seem to be how the IRS handles ROBS startups anymore.
    • Again correct ROBS setup, good C Corporation books and Corporate minutes negate most issues if you’re audited.
    • A ROBS C Corporation requires a valid, annual, independent business valuation. The 401(k) trust is a Department of Labor issue but the IRS enforces it.
      • The DOL also requires a Form 5500 preparation. The Form 5500 directions aren’t that great.
    • Most ROBS setup companies like Benetrends and Guidant will provide that and prepare the crucial Form 5500 for a monthly fee.
    • So that’s about $1,500 or so extra expense a year.
    • Your ROBS CPA doesn’t offer investment advice. However I don’t take on ROBS clients who I think will fail.
      • What is a good ROBS candidate?
          • Someone who can track all Corporations transactions.
          • Someone willing to abide by the seemingly capricious prohibited IRS transactions.
          • Someone who has experience with the company they’re buying or starting.

      Bottom Line – you probably want to use a CPA with extensive ROBS experience

      The ROBS technique works. But it may not be your best deal to capitalize your new company. Just be aware of potential pitfalls. The IRS literature is helpful but not complete.

      I’m a ROBS CPA tax accountant with a virtual office specializing in ROBS C Corporation taxation. Distance isn’t a factor for our service. For a free phone consult call:

      (910) 399-2705

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40 comments to CPA Accountant discusses ROBS setup in 2018 | Rollover Business Startups | Tax Form 5500 instructions

  • rod curry

    i am looking to set up a robs. can you give me some direction. thanks.

  • Kelly

    Gary, we have set up a ROBS for a real estate investment and property management business. I’m having a hard time finding accounting and/or book keeping services that are familiar and experienced with both. Is this something you can help with at your firm?

    • Sure Kelly we can handle that for you. I was the controller for a large real estate investment company with 30+ LLCs, S Corps, etc. I have rental property in my family. I was a 52 unit live in building manager in graduate school. We handle plenty of Form 1120 for C Corps. Plus I’m very familiar with ROBS. Why don’t you give me a call and we’ll see if we can move forward together. (910) 399-2705. No worries

  • R Maynard

    Are you familiar with the self directed c-corp annual tax filing and business valuations? I believe one of the required annual tax for is form 5400? I am not sure of all the required IRS forms but need to find someone that is…


  • Sherri

    Hi Gary,

    I set up a ROBS with Guidant financial and opened a veterinary practice in 2013. They filed my 5500 in 2013 but I do not know if they filed 2014 and I have been trying to contact them about 2015 but have not heard back. I am getting concerned and I have several questions? My CPA has no experience with this and I am also ignorant. Would you be available for a consult?

  • V Smith

    I’m a company truck driver and I’m looking to buy my own truck and become an owner operator not really looking to grow a company would a robs plan be beneficial to me

  • Pete

    Hi Gary.

    I’m considering a ROBS project to build small houses for at needs communities (e.g., autistic young adults). I’d like to loan myself money in the early stages and want to make sure I am on the rights side of the law for that loan… Does it have to be a secured loan? How do I determine a “reasonable” rate of interest?



    • Hi Pete. It seems silly but you should have a formal loan document. Interest rate? Maybe prime plus two. Payments should be mad even though that’s like transferring money from your left hand to the right. You might have to ask a lawyer about it being secured.

  • Ben

    Hi Gary,

    I have recently closed by ROBS C-Corp and, in the end, I have a $96,000 loss of Owner’s Equity. Can this loss be taken on my personal taxes in any way. I was the sole owner and sole member of “The Plan” that invested in the C-Corp.


  • Fabiola Law

    Gary, I work in a CPA office that has zero experience with ROBS. We file plenty of corporations. My husband set up a ROBS for his real estate investment business. I think I can handle preparing the corporate tax return. Is there anything different or anything I need to know when filing the corporate tax return?

    Thanks a million.

  • Oral

    Do you do valuations? I just completed my first year with a ROBS, but need an independent valuation for 5500.

  • Vincent Bonnemere

    Hi Gary,
    I am going to use a robs account to set up my small business. I own my own car but I was wondering if it was ok to sell my car to my c corporation (at the kbb value) using the funds from the self directed plan. My business involves driving 90% of the time. I will work out of my home. It will be wrapped with my franchise logo.
    Thanks for your time

  • Hi,

    I have an ongoing ROBS (C Corp), but my current CPA doesn’t offer anything above filing taxes. I’m set up in an enterprise zone. All employees are part time. I have used 3 years of approximately 4 years of tax credits, given my current run rate.

    I currently do not take a salary…rolling all profits back into the business to pay off the loan next year. As I approach exhausting my tax credits as well as paying off my loan, the corporation will be faced with a fairly large tax bill minus what I take in salary. I would prefer to take all net in salary to prevent the double taxation.

    I’m looking for a CPA who can help in the following areas:

    1. Double taxation avoidance (salary, bonus, etc.)
    2. ROBS yearly valuation
    3. Financial planning

    I appreciate and look forward to your response.

    • Hi. I’d like to have you as a client. Yes you can take it out in salary for 2016. Use a set of minutes to justify your pay. Trump says he’ll lower dividends to 15%. When he does my answer changes. But for 2016, yes. Valuation has to be independent. Once you get that valuation, usually about $400 you or I could file Form 5500- pretty easy. I’m good with financial planning but the ultimate decision is yours of course. Perhaps you can call me- 910.399.2705.

  • Janice

    Hello Gary. I’m thinking about using ROBS to expand my business. I’m an LLC and wanted to ask if I would need to form an S Corp? If so, would this be the first step?

    Thank you.

  • Larry

    Hi Gary, my business partner and I are looking at setting up RoBs as a possible way to fund an existing business that’s been around for over 20 years. I am concerned about the double taxation as a C Corp. Can you do a S Corp election at the end of the year with ROBS?

  • Will

    Gary, can a Roth 401K be used? I have a Solo Roth 401K that I can roll over to a new 401K in the new business.

    Also, I heard that you can recapitalize an existing business you own with a ROBS, is that true?



  • Greg Nield

    Gary what is the best exit strategy for a ROBS Plan? I set mine up with Guidant in 2012 and my business is successful but I want to get out from under all the record keeping and IRS/DOL paperwork required yearly. Guidant is more interested in me paying that monthly fee than answers on how to get out of the C-Corp. My initial investment was 260K rolled over from my 401K I’m guessing the business is worth close to 400K though I know a professional valuation is needed. Thanks/

  • Lynn

    Gary – could you give us a picture of how the Robs financing ENDS? Let’s say our business is a HUGE success within a matter of 10 years. What happens when we go to sell and “cash in” on that huge success?

  • Daniel

    “Most CPA accountants don’t deal with ROBS. Why” That line caught my attention. I’ve been researching ROBS for months and had found this out first hand. So I read over your blog and gave you a call. You were truly helpful and did not try to sell me either way. Thanks for your geniune professionalism.

  • JCM


    Before I start compiling a business plan which may take me a few months, I do have several questions for you.

    1. Can an inherited IRA where the original account holder was of retirement age, (as in I must draw a yearly minimum even though I am not of retirement age), be used to create a ROBS?

    2. Can a successful business dissolve and payback into an IRA, or the IRA it drew from?

    3. Can the same IRA/401k have ROBS withdrawn multiple times?

    Thank you.

  • Chuck Correll

    Hi Gary:

    Is there any legal way to get around NOT using family members in a ROBS financed business? My wife’s son from her first marriage has critical skills we could use.

    If not allowed under any circumstances, can we use him as a subcontractor.

  • Scott

    Gary, I am thinking of selling our ROBS C-Corp. Where can I find guidelines discussing how to structure a sale legally and in compliance with IRS rules? Thank you.

  • Al

    Gary, I’m a CPA in North Carolina — I’m looking to purchase an existing CPA firm using ROBS funds. Is this possible in North Carolina? The C-corp structure was not one that I envisioned operating in.


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