ROBS funding (Rollover as a Business Start Up)/401(k) rollover funding to fund a business start up, new franchise, buy an existing business or recapitalize an existing business is based on the initial step of starting a C Corporation as identified by the IRS. C Corporations, as opposed to a LLC, partnerships or sole proprietorships, offer a certain number of provisions that translate to tremendous benefits for business owners. Here are five especially beneficial provisions:
Making the Most of Medical Deductions
Owners of a C Corporation can receive health coverage on a tax-free basis and the Corporation can fully deduct its premiums. A C Corporation can also set up medical reimbursement plans to pay fixed dollar amounts for out-of-pocket medical costs of employees. As long as the plan is nondiscriminatory (i.e., does not favor owners), the reimbursements are not taxable to employees, while they are deductible by the Corporation.
Minimize Employment Taxes
Shareholder-employees of C Corporations pay FICA (Social Security and Medicare) taxes only on wages they receive. They do no pay self-employment taxes.
Less Risk of Being Audited
As opposed to a sole proprietor or an LLC, corporations are usually at a lower risk of being audited by the government.
Other business entities, such as partnerships and sole proprietorships, are tied to the owners. However, since the Corporation is its own legal entity independent of any owners, it can “live” indefinitely. As a result, the other owners of the business do not have to worry about the business dissolving if one owner dies or decides to leave.
Limited Liability Toward Business Debt
A Corporation is an independent entity from its shareholders. As a result, arguably the chief benefit of a C Corporation is that its owners are generally protected from being personally liable for the business’s liabilities and obligations.
Setting up a C Corporation in order to utilize ROBS/401(k) rollover funding and ensuring all required steps are followed to the letter of the law – taking no shortcuts – is essential. Tenet Financial Group specializes in non-debt funding like ROBS/401(k) rollover plans. No client of Tenet has ever been audited by the IRS, but, in the event an audit occurs, we stand behind our clients and would provide full, dedicated support. We can help with your unique funding needs.
Contact us today to speak directly with a senior consultant – 888-901-3335.