What does it cost to use my 401(k) to start a business through a ROBS?

By Kaz · Published 6 October 2026 · How this site checks figures

Summary

On the two price lists published for 2026, a ROBS (rollover as business start-up) costs $3,500 to set up and $1,200 a year at IRA Financial, or from $5,495 to set up and from $149 a month at Guidant Financial, which also tells customers to expect $500 to $1,000 a year in separate investment custodian costs. Over five years that's $9,500 at IRA Financial and roughly $16,900 to $19,400 at Guidant. Those are the fees you see. The others come from the structure itself: a C corporation that pays its own income tax, and a retirement plan that has to file a Form 5500 every year, with an IRS penalty of $250 a day, up to $150,000 per return, when it doesn't.

Five years of published fees

	IRA Financial	Guidant Financial
Setup	$3,500	From $5,495
Ongoing	$1,200 a year	From $149 a month ($1,788 a year)
Investment custodian	Not listed on the fee schedule	$500 to $1,000 a year, per Guidant's guide
Five-year total	$9,500	$16,935 to $19,435
As a share of a $100,000 rollover	9.5%	16.9% to 19.4%

IRA Financial's figures are from its fee schedule effective January 1, 2026, which adds that "pricing may vary depending on complexity." Guidant's are from its 2026 guide to ROBS, where the setup fee covers the corporation, the 401(k) plan documents and the stock purchase for up to three owners, and the monthly fee covers Form 5500 preparation, plan testing and amendments. Guidant's guide also suggests having "$50,000 or more" in retirement accounts before considering a ROBS. Elsewhere, Guidant describes the market as "around $4,000-$8,000" to set up and "$100 – $200" a month.

The table compares starting prices, not quotes. Ask each provider for a written total that includes the custodian.

How the money gets into the business

A ROBS takes four steps, and the IRS describes them the same way in its 2008 memo and its compliance project page. You form a new C corporation. The corporation adopts a 401(k) or profit-sharing plan that allows investment in company stock. You roll your old 401(k) or IRA into that plan. The plan then buys newly issued stock in the corporation, and the corporation has cash to spend on the business.

No tax or early-withdrawal penalty applies at any step, which is the whole appeal. Compare it with cashing out: in the 22% bracket at age 45, a $100,000 401(k) withdrawal costs $22,000 of federal income tax plus a $10,000 additional tax, $32,000 in all, before any state tax. The early withdrawal penalty and its exceptions shows where those figures come from. The ROBS fees are lower than that. They are not the only cost.

Costs that aren't on the price list

The company has to be a C corporation, because the plan buys its stock. A C corporation pays federal income tax at 21% of taxable income under section 11(b) of the Internal Revenue Code, the rate for tax years beginning after 2017, and money you later take out as dividends is taxed again on your return. How much that second layer costs depends on how much profit stays in the company and how much you pay yourself as salary, which is arithmetic an accountant can do with your own projections.

The plan is a separate legal entity. The IRS's ROBS compliance project found that "promoters incorrectly advised some sponsors they did not have an annual return filing requirement," relying on the one-participant exception for small plans. The IRS's answer: "the plan, through its company stock investments, rather than the individual, owns the trade or business. Therefore, this filing exception does not apply to a ROBS plan, and the annual Form 5500 is still required." The IRS penalty for a late Form 5500 or 5500-EZ is "$250 per day, up to $150,000" for each return, plus interest. Before signing, check whether the ongoing fee includes preparing the 5500, as Guidant says its monthly fee does, and who signs and files it.

The plan also has to stay open to the employees you hire. Among the problems the IRS lists are plans amended to keep later employees from buying company stock after the owner's rollover was in, and its 2008 memo treats a plan where only the owner can buy employer stock as a possible discrimination problem under the nondiscrimination rules.

Where ROBS plans have gone wrong

The IRS doesn't call a ROBS abusive. Its 2008 memo says it doesn't believe "the form of all of these transactions may be challenged as non-compliant per se," and that issues should be developed "on a case-by-case basis." The compliance project's findings were less about the form than about what happened next: "most ROBS businesses either failed or were on the road to failure with high rates of bankruptcy (business and personal), liens (business and personal), and corporate dissolutions."

Other items on the IRS's list are stock valuations "often devoid of supportive analysis," promoter fees paid from plan money (which the memo says may be a prohibited transaction if the promoter is a fiduciary), and no Form 1099-R issued for the rollover into the new plan. The prohibited transaction rules for retirement money invested in a business you control are covered in the self-directed IRA prohibited transactions guide.

Put the fees next to the alternative of leaving the money invested. Example: $100,000 in an IRA index fund with a 0.05% expense ratio costs $50 a year, $250 over five years, against $9,500 to $19,435 for the ROBS. That gap is paid whether the business does well or not. The fee calculator runs the same comparison with your own balance and percentages.

IRA Financial's ROBS fee schedule is linked from IRA Financial's website.

Sources

Written by Kaz, an independent publisher.
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