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https://myfranchisecpas.com/what-is-a-robs-reversal/ WHAT’S A ROBS REVERSAL? AND WHILE WE’RE AT IT, WHAT’S A ROBS & HOW DOES A ROBS WORK? Before I jump into what a ROBS Reversal is, let
me first tell you what a ROBS is. A ROBS, or Rollover for Business Startups, is a method of obtaining business funding. You obtain funding by moving money out of your retirement fund and
into your business. New franchisees will often use ROBS to cover the franchise fee and other initial expenses involved in opening a franchise. WHAT ARE THE ADVANTAGES AND DISADVANTAGES TO
USING A ROBS? ADVANTAGES OF A ROBS REVERSAL: • Debt-free funding for your business • Pull 401k funds out tax-free • Very fast funding DISADVANTAGES OF A ROBS REVERSAL: • Retirement funds at
risk (if business fails, your retirement funds are gone) • High annual fees (typically $1,500) • You HAVE to form a C-Corp, which is disadvantageous for most small businesses from a tax
perspective • Incredibly difficult to reverse SO AS YOU CAN SEE, THERE ARE REASONS YOU MAY OR MAY NOT WANT TO USE THIS METHOD FOR FUNDING YOUR FRANCHISE. Let’s say you enter into a ROBS and
then decide you want to leave it. Well how does that work? This is called a ROBS Reversal. THE PROCESS IS VERY COMPLICATED AND SHOULD NOT BE ATTEMPTED WITHOUT PROFESSIONAL GUIDANCE. IT
INVOLVES: • Estimating the price of your business • Communicating, in written form, your request to leave the ROBS to all requisite parties • Obtaining funding to cover your price estimate •
Re-purchasing your business shares • Dissolving/converting the C-Corp • Forming a new entity As you can see, the process is very complicated. Incorrectly estimating your business’s price or
excluding certain required parties from your written communications could result in costly fines, penalties or negative tax effects. Don’t worry. We’re here to help. My Franchise CPAs helps
franchisees like you who need to reverse their ROBS. OTHER SERVICES WE OFFER: • Outsourced CFO • Advanced Tax Planning Strategies • Bookkeeping Give us a call today for your free
consultation. ### JOHN MOLLICA, CPA, CISA | MYFRANCHISECPAS.COM _Have a question? Feel free to ask!_ _Get industry insights from one of our franchise experts:_
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