Rollover as Business Startup (ROBS) financing can be a great way to fund a new business or fund the purchase of an existing business using money from your retirement account. When setup correctly, a ROBS allows you to rollover retirement funds into your business without paying any taxes or early withdrawal penalties.
In this article, we review three popular ROBS providers and will give you our pick for the best ROBS provider for small businesses. If you are not familiar with Rollovers as Business Startups, start with our Ultimate Guide to ROBS.
Best ROBS Provider: Guidant Financial
In an industry where most providers offer very similar services, Guidant stands out because of its “Outside Counsel” program and stellar track record of helping entrepreneurs with ROBS financing. The Outside Counsel program allows you to talk to a lawyer before signing up for a ROBS, as well as during and after the transaction. Guidant also provides outside legal representation if your plan gets audited. Outside counsel is there to represent your best interests, not Guidant’s.
ROBS Provider Comparison Table
|When company began doing ROBS transactions||2003||1983||2006|
|Initial setup fee|
|$139/month plus $3.33/month for each employee after 10||$130/month||$120/month|
|Time to receive funds|
|2-3 Weeks||2-3 Weeks||2-3 Weeks|
|Plans that were audited in 2016|
|Approximately 0.32%||Approximately 0.5%||Approximately 2%|
|# of ROBS disqualified as a result of audits|
|Will the firm help in the case of an audit?|
|Contract includes outside counsel prior to ROBS setup|
|Yes, for two 1-hour sessions||No||No|
|Contract includes outside counsel in case of an audit||Yes||No||No|
|Annual number of ROBS||1,600+|
~60% are Franchises
~75% are Franchises
~96% are Franchises
Best ROBS Provider for Small Businesses: Guidant Financial
Guidant’s ROBS expertise is demonstrated in the over 10,000 business owners they’ve done ROBS for since 2003 and their A+ Better Business Bureau Rating. Guidant completes more ROBS transactions every year than any other ROBS provider we reviewed. And their clients are audited at a lower rate than their competition, with only about 0.32% audited in 2016. They outperform their competitors with their experience and overall results.
Guidant is the only ROBS provider that provides clients with access to outside counsel before, during, and after the ROBS transaction is complete. At the outset, every Guidant customer receives two 1-hour sessions with outside counsel, at no additional cost, to evaluate if ROBS is a good financing option. Plus, Guidant stands by their work. If your plan gets audited down the road, they provide outside counsel to defend you at no additional cost.
While the other firms employ lawyers who can assist you if you are audited, these lawyers ultimately represent the company and not the you. Outside counselors, on the other hand, have a fiduciary duty to you and should have your best interests in mind. Other firms have said they will provide outside counsel if the need arises during an audit, but there is no 100% guarantee to the business owner that they will receive it.
Best ROBS Provider for Franchises: Benetrends
Benetrends is another great option for people who want to do a Rollover as a Business Startup. In fact, Benetrends is actually the pioneer of ROBS. Their founder Leonard Fischer created what we today know of as ROBS over 30 years ago.Since then, Benetrends has never had one of their plans disqualified through an audit by the IRS or DOL. Benetrends does more than 1,200 ROBS per year.
While Benetrends does ROBS for both franchises and regular businesses it has special expertise in the franchise space. Benetrends’ founder is a past franchisee himself, and the current CEO is a board member of the International Franchise Association (IFA). In fact, roughly 75% of their clients are franchisees. According to the company, no other ROBS provider has more experience with ROBS transactions for franchises.
Benetrends is the most flexible provider we’ve reviewed when it comes to setting up your new company’s retirement plan. Their internal tax and financial experts work closely with you to determine what retirement plan is right for you, and they often change your plan as your situation changes. This means that you aren’t stuck with a cookie cutter retirement plan. Benetrends is experienced in setting up retirement plans such as profit sharing plans, 401(k) plans, and defined benefits plans.
Best Low Cost ROBS Provider: FranFund
FranFund will work with non-franchise businesses, but they focus on helping franchisees with ROBS. A whopping 96% of their ROBS clients start or buy a franchise!
FranFund is a good choice in terms of cost. The company has the least expensive setup fees and lowest ongoing fees of any of the ROBS providers we reviewed. However, ongoing fees are charged annually, meaning you’re on the hook for a full year of service even if you were to cancel early.
FranFund is newer to the ROBS space than both Guidant and Benetrends. They don’t do as many ROBS transactions per year as either and don’t provide outside counsel at the outset (the company did say, however, that they would provide outside counsel in the event of an audit but this is not detailed in their contract).
How We Chose Which Rollover as a Business Startup Providers To Review
ROBS, which stands for Rollovers as Business Startups, is a popular way to finance a new business or the purchase of a business by using the retirement savings of a small business owner.
If you do a ROBS correctly, you don’t have to pay any of the taxes or penalties that are normally charged when you withdraw money from your retirement account early. Common retirement plans, such as a 401(K), traditional IRA, and 403(b), are eligible for ROBS. Most ROBS providers require you have $50K or more in retirement savings in order to do a ROBS.
There are many providers that will help you set up a ROBS. The services provided include setting up your business as a C corporation (required to do a ROBS), creating a company retirement plan which includes the ability to buy company stock, and serving as the retirement plan administrator for your business and employees. Don’t worry if this all sounds complicated – the ROBS provider is there to help you.
For this article, we chose to review and compare 3 of the most popular providers in the space: Guidant, Benetrends, and FranFund. ROBS is one area where experience really matters because if you do things incorrectly, you can run into legal issues with the IRS or Department of Labor (DOL). Accordingly, we chose firms that have a successful track record of helping people finance their businesses with ROBS.
In-Depth Overview: Guidant Financial vs. Benetrends vs. FranFund
A Rollover for Business Startups costs about $5,000 up front and $1,100-1,500 per year after that. The cheapest pricing was offered by FranFund, which was $200 less in set-up fees and $120+ cheaper annually for ongoing fees.
All ongoing fees for ROBS are set up as an annual expense, but most providers allow you to pay this annual fee in monthly installments. Some will let you out of your contract with 30 days notice, but others will require you to pay the full annual fee no matter when you close your account throughout the year.
Time to Receive Funding
It generally takes about 2-3 weeks to set up a ROBS, but the exact time frame depends on the type of retirement account you currently have, the amount of funds you want to roll over, and other factors like how fast you respond to provider requests.
Setting up a ROBS takes place in multiple steps:
- Set up the business you are starting or buying as a C Corporation.
- Create a new retirement plan or profit sharing plan under the Corporation.
- Rollover the funds from your personal retirement plan to the new company retirement plan.
- The company retirement plan buys stock in the Corporation.
- Using the proceeds from the sale of the stock, you can start your business or buy a business.
You can learn more details if you wish by reading our Ultimate Guide to ROBS.
Audit Numbers & Audit Assistance
The percentage of ROBS transactions which are audited by the IRS is extremely small. Most people who set up a ROBS don’t have any issues and never hear from the IRS or the DOL. However, in the rare event that you are audited, you want a ROBS provider that will stand by you, help you limit the costs of the audit, and address any questions or issues that come up.
All of the firms covered in this article guarantee assistance if you are audited, but Guidant goes an extra step by guaranteeing the payment of outside legal representation.
Help From Outside Counsel
Guidant is the only ROBS provider that guarantees outside counsel in their contract. All 3 ROBS providers we reviewed in this article promise assistance with any audit you may face, however that what that assistance looks like varies significantly.
Options to Setup Company Retirement Plan
When you decide to use a ROBS to fund your startup or business acquisition you’re setting up a company retirement plan to own shares in your new C corporation. Most ROBS are setup as a 401(k) plan, but they can be setup as a number of different retirement plans, such as:
- Profit Sharing Plan
- 401(k) Plan
- Defined Benefits Plan
- Defined Contribution Plan
- A combination of plans, such as a 401(k) with a profit sharing component.
Help With Additional Financing
ROBS funds can be used in conjunction with other types of funding, like SBA loans and equipment financing. All three ROBS providers in this article can help you obtain additional funding for your startup, though none are direct lenders.
They help you package your loan application to lenders that they match you with through their relationships across the country. You can think of it like having a broker to help you find a loan and then holding your hand during the process of getting approved. For this they receive a consulting fee, a fee from the lender, or sometimes both. Any fee that they receive from a potential lender does not typically impact how much your loan cost is.
Assistance During the Sale or Unwinding of Your Business
When you sell a business that was funded with a ROBS there are extra considerations.
Selling your business through a stock purchase is an easy transition with the retirement plan getting their portion of the sale (whatever percent of the business they own). Once the proceeds are finalized then the retirement plan rolls into an IRA for the benefit of the owner. Most businesses, however, are sold through an asset purchase. This is when it becomes important to know how your provider helps you through the process of selling the business and unwinding the ROBS plan.
You should choose a company that has responsive customer service from the get go, is easy to access, and whose reps are knowledgeable and well informed about how ROBS works.
Ratings & Customer Satisfaction
All of these companies have been in business for over 10 years and have Better Business Bureau ratings of A+, which suggests that most of their customers have been satisfied with their services.
Guidant Financial, Benetrends, and FranFund will all help you rollover retirement funds to start or purchase a business while making sure you don’t make tax and legal mistakes that could have a negative impact.
To read more about what the process of establishing a ROBS is like, read our article about how to setup a ROBS. It’s important to weigh the pros and cons before starting the process. If you do decide to do a ROBS, Guidant is our top recommendation because of their expertise, reputation, and their outside counsel guarantee.