Acquiring a Business With ROBS

ACQUIRING A BUSINESS WITH ROBS

"Let's Chat with Jim Parker Business Broker" is proudly affiliated with the BBP Podcast Network

EPISODE: 10

RELEASE DATE: May 22, 2024

YOUTUBE CHANNEL: https://www.youtube.com/@JimParkerBusinessBroker

WEBSITE: https://www.JimParkerBusinessBroker.com

 

SHOW NOTES:

In this episode of "Let's Chat," Jim Parker discusses how business brokers can help clients acquire businesses using their retirement funds without tax penalties through Rollovers as Business Startups (ROBS). Guest expert Suzy Granger of Guidant Financial explains the process, legal requirements, benefits, and risks associated with ROBS, including setting up a C corporation and a self-directed 401(k) plan under ERISA law. They cover scenarios, the importance of compliance, ongoing support for clients including bookkeeping, and the impact of ROBS on buyers' retirement savings and business acquisition strategies. Suzy shares insights into the setup process, optimal timing for fund transfer, and the benefits of offering retirement plans to employees in a ROBS-financed business.

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To connect with Suzy:

email: [email protected]

call or text: 281.942.0530

00:00 Welcome to "Let's Chat": Insights for Business Brokers

00:43 Introducing the ROBS Strategy with Suzy

00:54 Understanding ROBS: A Deep Dive into Retirement Funds for Business Acquisition

01:48 The Mechanics of ROBS: How It Works and Its Benefits

06:21 Navigating the Risks and Compliance of ROBS

10:57 The Evolution of ROBS and Its Impact on Small Businesses

17:49 ROBS in Practice: Real-Life Scenarios and Examples

21:55 Selling a Business with ROBS: What Brokers Need to Know

24:46 Expanding the ROBS Conversation: Eligible Retirement Accounts and Deal Sizes

28:14 Exploring Tax Benefits and Corporate Structures

28:42 The Impact of Tax Code Changes on C Corps

29:14 Navigating Double Taxation and Salary Strategies

30:01 Maximizing 401k Contributions Through Dividends

30:45 Expanding Business Opportunities Across States

31:20 Evaluating Business Types for ROBS Financing

33:02 Understanding Restrictions on ROBS Fund Usage

33:51 Integrating ROBS into Business Brokerage Services

37:06 Strategic Timing for ROBS Financing in Business Deals

40:27 The Role of Business Brokers in ROBS Transactions

42:53 Success Stories and the Lifecycle of a ROBS

44:40 Future of ROBS and Financial Regulations

54:20 Final Thoughts and Contact Information

 

BLOG:

Unlocking Business Opportunities: How ROBS Can Transform Your Business Acquisition

Navigating the complex world of business acquisition can often feel like an uphill battle, especially when financial constraints come into play. However, a little-known strategy could open up new horizons for aspiring entrepreneurs and seasoned business owners alike. The strategy in question? Rollovers for Business Start-ups (ROBS). Today, we delve into the intricacies, benefits, and considerations of utilizing ROBS, drawing insights from an enlightening conversation with financial expert, Suzy Granger.

Understanding ROBS: A Game Changer in Business Financing

ROBS allows individuals to invest their retirement funds into a new or existing business without incurring early withdrawal penalties or tax liabilities. This innovative approach offers a lifeline for buyers who might not have immediate access to liquid cash but possess substantial funds in their retirement accounts.

The Conversation with Suzy Granger

Jim Parker introduces us to the world of ROBS through a detailed conversation with Suzy Granger, a seasoned professional in retirement funding solutions. With over 20 years of experience, Suzy provides a comprehensive overview, demystifying the process and highlighting the unique advantages of ROBS.

The ROBS Structure Explained

The conversation begins with a clear explanation of the ROBS structure. Simply put, ROBS involves establishing a C-corporation that sponsors a 401(k) plan. The individual can then roll over their existing retirement funds into the new 401(k) without tax penalties, and these funds are used to acquire or invest in the business.

Key Advantages

Suzy succinctly outlines the primary benefits of ROBS: avoiding the hefty penalties associated with early retirement fund withdrawals and maintaining liquidity. In a climate where financial flexibility is paramount, leveraging retirement funds through ROBS offers a viable path to business ownership. Furthermore, Suzy stresses the investment aspect, clarifying common misconceptions about ROBS being considered a loan or incurring debt.

The Compliance Caveat

A pivotal part of the discussion revolves around compliance. Suzy warns of the stringent requirements set by the IRS and the significance of maintaining compliance to evade penalties. Through her company, Guidant, she ensures clients navigate these complexities smoothly, providing ongoing support to ensure both initial and continuous compliance.

The Success Stories and Cautionary Tales

From thriving jewelry businesses to less fortunate ventures, Suzy shares anecdotes highlighting the diversity of outcomes. These narratives serve as a potent reminder of the risks and rewards associated with using ROBS for business financing.

Dialogue on Employee Participation

An intriguing aspect of the conversation touches on employee participation in the 401(k) plan. Suzy clarifies a common concern: employees participating in the ROBS-funded 401(k) do not purchase stock in the company, but instead have a range of investment options typical of 401(k) plans.

Final Thoughts

The exchange between Jim Parker and Suzy Granger sheds light on the intricacies, advantages, and considerations of employing ROBS in business acquisitions. While ROBS presents a compelling option for funding, it demands careful consideration, strict compliance, and professional guidance.

In stepping into the world of business ownership through ROBS, potential buyers are afforded a unique opportunity to realize their entrepreneurial dreams. Yet, the path is nuanced, filled with both opportunity and obligation. As with any significant financial decision, thorough research, due diligence, and the right professional advice are key to leveraging ROBS effectively and responsibly.

Conclusion

ROBS stands out as a transformative strategy for business acquisition, particularly for individuals seeking alternative funding avenues. By understanding the nuances, aligning with compliance requirements, and leveraging professional support, aspiring business owners can navigate their way to successful ventures with ROBS as their financial cornerstone.

 

KEYWORDS:

Let's Chat, Jim Parker, business broker, Suzy Granger, ROBS, retirement savings, business sales, business owners, 401(k), business financing