when closing a ROBS funded C-Corp …
When you sell the assets in a c-corp partially funded by a ROBS (Roll over Business Startup Plan);
are the QES – qualified employee stocks funds amounts plus any gains put back into the employee stock fund pre or post-tax treatment?
Thanks for your question!
When you sell the assets from your C-Corp funded by ROBS, you will return the funds, plus any gains, back into the plan fund pre-tax, proportionate to the investment. For example, if your ROBS owns 50% of shares in your company, it should receive 50% of the asset sale, proportionate to the initial investment. Until you withdraw that money from your retirement plan, it will not be subject to taxes.
Any other investments will be treated according to the tax treatment appropriate to the investment type. For instance, if you purchased 50% of the C-Corp shares in post-tax cash (i.e. you initially funded the business by contributing 50% post-tax cash and 50% pre-tax ROBS proceeds), then 50% of the proceeds from the asset sale would be subject to taxes.
It is highly recommended that you consult your ROBS provider prior to unwinding a ROBS arrangement. They will be able to assist you in performing all necessary steps, and may have you work with an ERISA attorney or attorney familiar with ROBS.
Best of luck!