Roll over Business Start up - 401K funded

[Bill Pollnow]

I recently left a job of 18 years and have an existing 401K. I am considering/wanting to take these funds out/use them for real estate purposes and have recently came across a company/recommended by my attorney/that specializes in a custom type of ROBS(Roll Over Business Start up). Their explanation is "An ERSOP® plan is an Internal Revenue Code tax-qualified profit sharing plan that allows for rollover money to be invested into the sponsoring business."  

The premise being it allows you to be an active participant in real estate management/which a SDIRA(Self Directed Individual Retirement Account) doesn't allow.   There is a lot to the rollover which involves creating a C Corp and Profit Sharing/Trust Plan. 

Any one have familiarity with this/can give me their input?  Thanks.     

[Brian Eastman]

@Bill Pollnow

The ROBS program is valid and has been in use since the 1980's.  You definitely want to work with a qualified provider that knows what they are doing, not a 1-man attorney operation.

The ROBS structure is entirely different from an IRA. There are a few restrictions designed to keep you from pirating your retirement plan personally, but you can invest retirement funds into your own business without taxes or penalties. The normal rules you see about arm's length investing with an IRA to not apply. This is not an IRA.

The underlying business does need to be an active enterprise that creates trade or business income, such as real estate development, frequent flipping, or operating a hotel or self-storage business.  This tool will not work for passive investment holdings like rentals.