ROBS Business Valuation
Using your 401(k) to fund a business? You need an independent, IRS-compliant valuation to ensure your ROBS transaction is defensible.
What Is a ROBS Valuation?
A Rollover as Business Startup (ROBS) arrangement allows you to use funds from your 401(k) or other qualified retirement plan to invest in a new or existing business — without incurring early withdrawal penalties or taxes. However, the IRS requires that the stock purchased with retirement funds be valued at fair market value at the time of the transaction.
An independent business valuation is critical to a compliant ROBS structure. If the IRS determines that shares were overvalued (you paid too much with retirement funds) or undervalued (a prohibited transaction), the consequences can include plan disqualification, back taxes, and a 10% early withdrawal penalty on the entire rollover amount.
Who Needs a ROBS Valuation?
- Entrepreneurs using 401(k) funds to purchase or start a business
- Franchise buyers funding their investment through a ROBS arrangement
- Existing ROBS businesses needing annual valuation updates
- ROBS providers and facilitators requiring third-party valuations for clients
- Business owners considering a ROBS exit or winding down the structure
What's Included in Your Report
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Frequently Asked Questions
When do I need a ROBS valuation?
You need a ROBS valuation at the time of the initial rollover transaction to establish the fair market value of the stock you are purchasing with retirement funds. Annual updates are also typically required for ongoing Form 5500 compliance as long as the plan holds company stock.
Can the IRS reject my ROBS arrangement?
Yes. If the IRS determines that shares were purchased at above or below fair market value, it can classify the transaction as a prohibited transaction, potentially resulting in plan disqualification, back taxes, and a 10% early withdrawal penalty on the entire rollover amount.
Do ROBS providers accept your valuation reports?
Yes. Our reports are used by ROBS providers and plan custodians nationwide. They are USPAP-compliant, signed by certified appraisers, and designed to meet IRS requirements for ROBS transactions.
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