What happens to my ROBS investment when I sell my business?
A lot of people who think about funding their business through a ROBS wonder what happens when they sell the business.
The funds you invest in your business through a ROBS start out as, and remain, retirement funds. That’s why you can roll them over without paying early withdrawal penalties and income taxes. And they remain retirement funds while you operate and grow your business. Your 401k account is holding on to shares in your business.
If you sell the business, your 401k account (which is holding some amount of shares of your business) will exchange the shares of the business it’s holding for cash from the buyer. At that point, you’ll have cash in your 401k account which you can then invest as you see fit. But all of the funds within that 401k remain subject to early withdrawal and tax rules that all retirement accounts are subject to.