Hi Reader

Most buyers hit the same wall.

The business checks out. The lender is warm. Then you look at the equity check.

Say you need 10% down on a $2M deal. That’s $200K. Where does it come from? Savings you’d rather not touch. A HELOC on the house your kids sleep in. Or investors who want a slice of a company you don’t even own yet.

There’s another pile of money most buyers forget. It’s sitting in an old 401(k).

It’s called ROBS. It lets you use retirement money as your equity check. No loan. No early withdrawal penalty. Done right, it’s a real tool. Done wrong, it’s a tax problem with your name on it.

So I brought in two people who know it cold. Wes Tang-Wymer and Jon Roberts founded Nexus. They went through ROBS themselves, hated the process, and built something better.

Today they walk you through what ROBS is, who it fits, and how to pick a provider.

Stick around. I’ll be back at the end with what I’d watch before you pull the trigger.

Introducing Wes Tang-Wymer and Jon Roberts

Wes and Jon are the founders of ​Nexus, a ROBS product built to work like the finance apps you already use. It pairs a modern interface with a guided digital workflow that walks you step-by-step from initial eligibility check through funding and stock issuance. You can complete your application on the Nexus site without a sales call or any fee commitment.

Before building Nexus, Wes and Jon spent their careers advising and investing in companies at the intersection of finance and technology. They decided to build Nexus after going through the ROBS process themselves with an incumbent provider - a process that left them confused and frustrated after countless phone calls, emails, handoffs, and 50+ PDFs.

What is ROBS?

Rollovers as Business Startups ("ROBS") lets qualified buyers convert existing retirement savings into equity for their acquisition without draining personal cash, over-leveraging, or selling equity to outside investors. It is a common way to fund an equity injection and can work alongside SBA financing, personal capital, or outside investor capital. Unlike HELOCs or early retirement plan withdrawals, it does not incur debt or penalties when done correctly. See how ​ROBS compares to other ways that buyers fund ownership.​

Who uses it?

ROBS is typically used by experienced operators moving into ownership: mid-career professionals leaving W-2 roles, franchise buyers, searchers, small-business acquirers, and independent founders. Buyers choose ROBS for a variety of reasons, including to:

● Optimize personal liquidity and extend cash runway.

● Reduce leverage and strengthen the acquired company’s balance sheet (including enhancing post-closing liquidity).

● Increase equity check size to support a larger transaction.

● Keep more ownership and avoid unwanted outside dilution.

● Generate wealth by building tax-deferred value inside the 401(k) plan.

Is it a fit for me?

Here’s a five question checklist to determine whether ROBS could work for you:

● Can I afford to put the ROBS rollover amount at risk?

● Does this business have economics I understand and have verified?

● Will I work in the business as an active operator, not a passive investor?

● Do I have $50K+ in eligible retirement funds?

● Am I prepared to run a real C-Corp, with a real 401(k) plan attached, by the rules?

As with any funding source, ROBS carries risks you should consider. It converts a diversified retirement balance into a single equity position in your private company. Business failure can wipe out that capital. It also creates a 401(k) plan and a C-Corp with ongoing administration and maintenance requirements. More here to help you evaluate if ​ROBS could be a good fit.​

A step-by-step overview

A ROBS arrangement must be set up and executed carefully. Key steps include:

1. Form a C-Corporation. Form a new C-Corp. Designate a registered agent and obtain an EIN.
2. Adopt a new 401K plan. The C-Corp adopts a new 401(k) plan and trust. Obtain an EIN for the 401(k) plan.
3. Open operating and custodial accounts. Open a C-Corp bank account and a 401(k) plan custodial account.
4. Rollover eligible retirement funds. Initiate a direct trustee-to-trustee rollover of your existing retirement funds into the new 401(k). This should be structured as a tax-deferred rollover.
5. Fund the business. The 401(k) plan buys newly issued stock in the C-Corp. The C-Corp can use the cash as equity in an acquisition or to pay operating expenses.
6. Operate the C-corp and 401(k) compliantly. The C-Corp and the 401(k) plan must be operated inside applicable rules.

Read the ​ROBS explained guide for more detail on each of the process steps.

Selecting the right provider

You've decided on ROBS. Now you're choosing a provider and are trying to figure out which one is right for you. The answer: it depends. Providers differ across four dimensions in how they execute and administer your ROBS arrangement. Evaluate each before you choose.

● What the administration fee covers. Every ROBS structure carries recurring obligations, but providers differ in terms of what their ongoing administration fee includes. Items commonly covered by some providers but not others include: the ERISA fidelity bond, registered agent renewal, C-Corp filing fees, annual valuation, and cap table management items. If not covered, you will need to source, purchase, and administer these yourself.

● Engagement model. Providers vary greatly in how their service is delivered across the three stages of ROBS: confirming eligibility, setting up and funding the structure, and keeping it compliant. Some employ a guided digital experience, while others rely on emails and phone calls. Ask providers to demo their product to gauge whether it covers the full workflow and if it is something you would want to use.

● Pricing transparency. Most providers publish pricing. The challenge is arriving at an “apples-to-apples” comparison since the numbers often come in different units with different inclusion lists. Be thorough in your evaluation and calculate the all-in pricing for both the setup and the ongoing administration to get an accurate comparison.

● The rest of the operating stack. A newly funded business needs things beyond ROBS - banking, payroll, and recordkeeping to name a few. Some providers offer in-house solutions. Others connect you to specialized partners. Others provide nothing and leave it to you. Weigh the trade-offs of a bundled offering against the flexibility of choosing your own vendors.

FAQs

ROBS has existed for over 50 years and is still one of the most misunderstood ways to fund a business. Here are answers to some common questions:

● What’s the minimum amount?

○ There is no statutory minimum. In practice, $50,000 of eligible retirement funds is where the fixed costs can begin to make sense. Most buyers contribute $100,000 or more.

● Which retirement accounts qualify?

○ 401(k), Traditional IRA, 403(b), 457(b), SEP-IRA, SIMPLE IRA, and similar qualified pre-tax retirement accounts typically qualify. Roth IRAs and inherited IRAs don't work.

● How long does a ROBS rollover typically take?

○ Timelines vary by ROBS provider, with 4 - 6 weeks being typical. Nexus reports that most of its plans are funded in 2–3 weeks. The key variable is often how long it takes the custodian holding your retirement funds to wire them to the new 401(k).

Explore further

Ready to proceed? You can complete your application and check your eligibility with ​Nexus without a sales call or any fee commitment.

Want to learn more? Contact Wes and Jon at founders@talcottforge.com to schedule a Nexus demo or discuss the specifics of your situation.

Before you pull the trigger

Good stuff from Wes and Jon. I’ve been on more than 800 calls with buyers. Here’s what I’d watch before you use ROBS on a deal.

It’s still your retirement. Their first checklist question matters most. If the business fails, that money is gone. Not down 20%. Gone. Only roll over what you can live without.

It changes how you buy. With ROBS, you buy through a C-Corp. That company is the buyer on your LOI and your purchase agreement. It also affects your taxes when you sell someday. Talk to your CPA before you sign an LOI. Not after.

Tell your lender early. ROBS can work alongside an SBA loan. But lenders want to see it up front, and some add extra steps. And don’t count on ROBS to get you out of a personal guarantee.

Setup takes weeks. Compliance lasts as long as you own it. The IRS has taken a hard look at ROBS plans. The common misses are boring ones. Skipped annual plan filings. A plan that isn’t offered to the people you hire. Sloppy stock valuations. Boring mistakes still cost real money.

So here’s my ask. If ROBS might fund your deal, put it on the table on day one. Your lender and your CPA should know before your LOI goes out.

See you next week.

— Eric

Disclosures

Guest content. This issue features a guest post from Wes Tang-Wymer and Jon Roberts, founders of Nexus. The views, claims, timelines, and pricing in their section are their own. Buyers Black Book has not independently verified them and does not endorse any ROBS provider.

Relationship Buyers Black Book received no payment for this post and has no financial relationship with Nexus

Not advice. Buyers Black Book is for general education only. Nothing in this issue is legal, tax, financial, investment, or retirement advice. ROBS carries real risk, including the loss of your retirement savings, and it must follow IRS and Department of Labor rules. Talk to a qualified CPA, attorney, and financial advisor about your own situation before you use retirement funds to buy a business.

Third-party links. Links in this issue go to sites Buyers Black Book doesn’t control. Do your own research before you sign up for any product or service.