Roll 401k to a self directed but, I own a business with employees

2 Replies

I own a remodeling/handyman business in Chicago. Its been a slow winter and we are moving to a new office that is eating up lots of my cash. I am in a bit of a cash crunch for the next few months and wanted to tap my 401K for a 50k loan. I have done this before, and paid it back, but I am wondering if the ROBS method would work for me. I do NOT have an existing 401K set up for my company currently as this is money from an old 401k from an old employer.

Could I take the old 401k money set up another C corp, (besides the S corp I already own with employees) for a loan to my existing business?  I think I would be looking to do a "ROBS" type of deal. 

I have am comfortable taking the money out of the existing account for a 50k loan. I am just thinking if I go the ROBS route I could have access to more of the money if necessary.

In the end it would be nice to have a convenient way to access more of the 401k money if necessary and not be stuck with the 50k minimum the plan allows. Maybe someone has another direction I should go?

Hope this makes sense. Just joined today but I am finding huge value in this board already. Thanks in advance!

Jim

@Jim Copen : The fact that you have employees, you have to cover all employees in your 401K plan across all the entities where you have majority ownership or majority control (there are some thresholds -- I am simplifying it here). You could do a ROBS transaction as you suggest, but you have to allow all the employees to participate in the acquisition of the shares of your entity (of course it cannot be shares of the S-corporation that can be acquired within the 401K). If you plan to go down this method, keep in mind, you may also have to file exempt securities for your C-corporation as it would be considered an offering (just because you have employees) and you would have to spend additional funds each year to have a qualified appraisal (could be NAV, Book Value or FMV -- but must be done by a qualified appraiser) done on the private shares of the business (this is requirement no matter what).

Hi Rajeev-

Thanks so much for the response. I was sort of thinking this would be the case but could not find a way to confirm. I really appreciate your response!

Thanks!

Jim

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