Q: I filed for personal bankruptcy. The trustee is asking me to explain how my ROBS 401k invested in my C-Corporation business. Please provide information to satisfy his lack of knowledge with regard to a self directed 401K.
A: Here is an explanation of the rollover as business start up transaction.
More Resources
401k Business Financing FAQs
http://www.mysolo401k.net/401k-business-financing/401k-business-funding-faqs/
IRS Resources that Explain the 401k Business Financing Structure
http://www.irs.gov/Retirement-Plans/Employee-Plans-Compliance-Unit-(EPCU)-Completed-Projects-Project-with-Summary-Reports-%E2%80%93-Rollovers-as-Business-Start-Ups-(ROBS)
http://www.irs.gov/pub/irs-tege/rne_fall10.pdf
http://www.irs.gov/pub/irs-tege/robs_guidelines.pdf
A: Here is an explanation of the rollover as business start up transaction.
- A new C-corporation is established.
- Corporation sponsors a new 401k/PSP.
- The IRA and/or former employer 401k funds are transferred to the new 401k/PSP.
- The new Corporation issues stock shares to the 401k/PSP.
- The business owner is an employee of the Corporation and he or she can take a reasonable salary.
- To the extent that the corporation generates profits and elects to distribute those profits to the owners of the business, the percentage of the profits associated with the shares held in the 401k/PSP will flow back to the 401k/PSP brokerage account.
More Resources
401k Business Financing FAQs
http://www.mysolo401k.net/401k-business-financing/401k-business-funding-faqs/
IRS Resources that Explain the 401k Business Financing Structure
http://www.irs.gov/Retirement-Plans/Employee-Plans-Compliance-Unit-(EPCU)-Completed-Projects-Project-with-Summary-Reports-%E2%80%93-Rollovers-as-Business-Start-Ups-(ROBS)
http://www.irs.gov/pub/irs-tege/rne_fall10.pdf
http://www.irs.gov/pub/irs-tege/robs_guidelines.pdf
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