Can I use my 401(k) to buy a business (ROBS)?

How does a ROBS work, step by step?

A ROBS is a sequence of legal steps. A provider or ERISA lawyer usually sets it up. The general order:

1. You form a new C-corp. A ROBS does not work with an LLC or S-corp taxed as a pass-through.
2. The C-corp adopts a new retirement plan, usually a 401(k), that allows investment in company stock.
3. You roll funds from your existing 401(k) or IRA into the new plan. It is a rollover, not a withdrawal, so no income tax is due at that step.
4. The new plan buys shares of the C-corp.
5. The C-corp now has cash. It uses that cash to buy the business, or as the buyer's equity alongside an SBA loan.
6. You work in the business as a bona fide employee and are paid a salary.

The rollable funds must be pre-tax. Roth money and plans at a current employer may not be eligible to roll. Check with your plan administrator before you count the money.

How does ROBS fit with an SBA loan?

As of October 2026, an Initial Acquisition under SBA SOP 50 10 8.1 needs an equity injection of at least 10% of total project costs, and the lender cannot reduce it. ROBS money is one way to fund that 10%.

Worked example

1. Purchase price: $1,100,000. Working capital: $60,000. Fees and closing costs: $40,000. (Illustrative.)
2. Total project costs: $1,100,000 + $60,000 + $40,000 = $1,200,000.
3. Required injection: 10% x $1,200,000 = $120,000.
4. Option A: the plan invests $120,000 from your rollover in the C-corp. You need no other cash for the injection.
5. Option B: the plan invests $60,000, and the seller provides a $60,000 note on full standby. $60,000 is exactly half of $120,000, the most limited sources can cover.
6. SBA loan in both options: $1,200,000 - $120,000 = $1,080,000.

Lenders review ROBS structures closely. Ask your lender early how it documents the plan's ownership, who must sign personal guarantees, and how it wants the funds' source shown. Injection funds generally must sit in the account about 30 days or be documented as to source; a ROBS rollover leaves a paper trail, which helps.

What are the risks?

• Concentration. You move retirement savings out of a diversified account into one small company you also work for and personally guarantee. If it fails, you lose your job, your investment and the retirement money at once.
• Compliance. The plan is a real retirement plan. It has annual filings, must treat eligible employees fairly, and has to follow IRS and Department of Labor rules. A mistake can turn the rollover into a taxable distribution.
• C-corp taxes. A C-corp pays corporate tax, and dividends are taxed again to shareholders. Pass-through entities avoid that second layer. Your CPA should model the difference for your deal.
• Ongoing cost. Providers charge setup and ongoing administration fees. Get the full schedule in writing and compare more than one.
• Selling later. When you sell, proceeds attributable to the plan's shares go back to the plan. That is retirement money, with withdrawal rules attached.

What are the alternatives to a ROBS?

• A withdrawal. Simple, but the amount is taxed as income, and before retirement age a penalty usually applies. It costs far more of the balance than a ROBS does.
• A 401(k) loan. Some plans allow loans. They are capped by tax law and must be repaid, and leaving your job can accelerate repayment. Many buyers leave their job to run the business, so this often does not fit.
• Personal savings plus a standby seller note. Keeps retirement money separate. The seller note can cover up to half of the 10% if it is on full standby.
• Passive investors. Investors holding under 20% together can fund part of the injection. They generally receive only tax distributions until the SBA loan is repaid.

If you plan to buy more than one business

A ROBS forces a C-corp, which is also the usual entity for a holding company that plans to raise outside equity or list one day. That alignment can be useful. But a ROBS plan that owns a large share of your company also complicates future raises, rollovers to sellers and any listing, because a retirement plan sits on the cap table. Decide with your lawyer and CPA whether the ROBS entity is the operating company or the parent. See Should a holding company be an LLC or a C-corp?

This is not tax or legal advice. ROBS rules turn on ERISA and tax law. Confirm the structure with an ERISA attorney and a CPA, and confirm the injection treatment with your SBA lender.

Where these numbers come from: The $60,000 practical minimum, C-corp requirement and employee requirement are from Guidant Financial. The 10% injection, limited-source and seasoning rules are from SBA SOP 50 10 8.1 as summarized by Beancount and Starfield & Smith. Confirm current terms with an SBA lender. SOP 50 10 8.1 applies to loans that receive an SBA loan number on or after October 1, 2026 (SBA Information Notice 5000-880695).

Related questions

Is a ROBS legal?

Yes, when it is set up and run correctly. It relies on a retirement plan buying employer stock, which the law allows. The risk is in the operation: plan administration, filings and fair treatment of employees.

How much do I need in my 401(k) for a ROBS to make sense?

Providers describe roughly $60,000 or more of rollable pre-tax funds as the practical minimum. Below that, fees take a large share. Also consider how much retirement money you can afford to lose.

Can I use a ROBS for the whole purchase?

Only for a small business, or if your balance is large. For most deals, ROBS funds the equity and an SBA loan funds the rest. As of October 2026, the SBA loan still requires at least 10% of total project costs as equity.

What comes next

The injection is not your only cash outlay. Read What does buying a business cost beyond the down payment?

Related articles

• How much cash do I need to buy a business?
• How do you finance buying a business?
• Can you really buy a business with no money down?
• What kind of entity should you buy a business through?
• How do you build a holding company for acquisitions?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.