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Buying A Business Or Franchise With A Rollovers As Business Startups Is A Big No-No According To Nabers December 17, 2009

Posted by admin2 in : Rollovers As Business Startups , add a comment

Thinking about rolling over your 401k to purchase a new franchise or a personal business venture, then you might want to think again?

Authors Jeff Nabers and Phoebe Chongchua (Five Steps to Freedom: How to Cut Your Dependence on Institutions and Escape Financial Slavery) suggest that using an investment structure known as Rollovers As Business Startups (ROBS) to fund a business startup or franchise is an IRA prohibited transaction.

Jeff Nabers is CEO of Nabers Group, an unconventional planning company in Denver, Colorado. His research and personal dealings with the Department of Labor compel him to recommend against the Rollovers as Business Startups strategy.

Nabers Group can be reached at (877) 903-2220.  Watch more Nabers videos.

The End of Small Business Financing with IRA and 401k Funds? (Part 3) October 21, 2009

Posted by Jeff Nabers in : Self Directed IRA Solo 401k , 27comments

mystery

Ok, now it’s time to solve the mystery. (Final Post) [see previous here]

In 1978 Jimmy Carter reorganized the government with this order, and this took the issue of retirement account prohibited transactions away from the domain of the IRS and gave it to the Department of Labor (DOL).

This fact was unknown to (or possibly ignored by) the ROBS promoters who claimed the IRS ROBS letter confirmed the validity of the ROBS strategy. The truth is that the IRS letter did not say whether or not the ROBS strategy creates a prohibited transaction because the IRS didn’t have the authority to say it. It was the authority of DOL. Ah, what fun bureaucracy can be.

Speaking with the Proper Authority

Now, I’ve known about this transfer of authority ever since the creator of the IRA LLC (late attorney Debra Buchanan) told me about it back in 2004. So I’ve been in close contact with DOL employees for several years. Here’s where the bureaucracy gets funny (or scary, depending on how you look at it).

A couple of weeks after the IRS ROBS letter came out, I called my friendly DOL contacts to ask, “What do you (more…)

The End of Small Business Financing with IRA and 401k Funds? (Part 2) October 19, 2009

Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment

dc_jefferson_memorial

[This is a continuation of a previous post. You should read that one first so this makes sense.]

The IRS Responds

For the first time ever, the IRS actually addressed the “financing a small business with an IRA or 401(k)” strategy. They called it “ROBS” for “roll over business startup,” and issued a letter on October 1, 2008. This letter basically stated:

Celebrate and Ignore

Most ROBS promoters spun the IRS ROBS letter as a long-awaited government blessing for the strategy. They said that the concerns that the IRS listed were administrative errors, such as (more…)

The End of Small Business Financing with IRA and 401k Funds? (Part 1) October 15, 2009

Posted by Jeff Nabers in : Self Directed IRA Solo 401k , 9comments

road_block

Guidant calls it Audeo. Benetrends calls it Rainmaker. SDCooper calls it ERSOP. It goes by many names and it’s gotten a lot of attention from the franchise industry and, as of about a year ago, the IRS. The IRS calls it “ROBS” for Roll-Over Business Startup.

What is it?

It’s a strategy where a person with retirement funds:

  1. Forms a C corporation.
  2. Uses the new C corporation to adopt a 401(k) or profit-sharing plan.
  3. Performs a rollover from existing retirement funds (IRA, 401k, etc) into the new 401(k) plan.
  4. Directs the new 401(k) plan to invest into the new C corporation by purchasing shares of stock.
  5. Now this person has a C corporation with some or all of their retirement funds in it, and they are told they can use the funds to run the corporation, launch a venture, buy a franchise, and even pay themselves a salary.

Special Powers – For Good or Evil?

This is a tremendously (more…)