ROBS working-capital planning

For ROBS working-capital planning, count only unrestricted cash owned by the C corporation and available for corporate use. Do not count plan-trust cash, employer-stock value, personal cash that has not been documented into the corporation, restricted loan proceeds, escrowed purchase money, uncollected bookings, collected taxes, or reserves that must stay segregated. The ROBS sequence is source account to receiving plan trust to employer stock to C corporation to corporate bank to documented operating use. ^{[1][2][3][4][5][8][9][10]}

A ROBS transaction has several actors. The individual owns retirement-account rights before a distribution is available. The new qualified plan, through its trust, owns plan assets after a valid rollover. The plan buys employer stock. The C corporation receives the stock-purchase proceeds and owns the operating cash. The lender owns its loan claim and can restrict proceeds. The seller, franchisor, landlord, payroll provider, tax agency, and vendors receive cash only when the corporation has a documented obligation to pay them. Keeping those actors visible prevents the common mistake of treating all money as one pool. ^{[1][2][4][5][6][7]}

The plan remains a real retirement plan after the funding step. The IRS ROBS project specifically points to plan separateness, recordkeeping, Form 5500 issues, stock valuation, coverage problems, and business failures. The DOL fiduciary booklet adds the need for a written plan, trust, records, prudent process, reasonable fees, service-provider monitoring, and attention to prohibited transactions. ^[1][5]

A useful working-capital model begins with a source-and-use ledger, not a single bank-balance number. Each row below answers who owns or controls the cash, what it may be used for, and why it should not be blended with another bucket.

If $250,000 is paid to a seller, escrow agent, franchisor, or landlord, those dollars are no longer runway. If a $60,000 lender draw is limited to inventory, it cannot cover payroll unless the loan documents permit that use. If a customer books $180,000 but pays only $72,000 inside the forecast, the missing $108,000 is not cash. ^[8][9][10]

Working capital is a cash-timing problem. A profit forecast can still fail if inventory, payroll, taxes, rent, debt service, and vendor payments leave before customer cash arrives. SBA finance guidance distinguishes accrual and cash methods and identifies accounts receivable, accounts payable, available cash, bank reconciliation, and payroll as core bookkeeping areas. ^[8][9]

Build the model on actual due dates. Payroll and payroll taxes may hit before receipts clear. Sales tax, customer deposits, and deferred revenue may sit in the bank but still belong to a later remittance or delivery obligation. Inventory deposits and vendor holds may be necessary for sales that will not be collected until a later month. ^[8][9]

A minimum-cash trigger is not a universal percentage of revenue or a fixed number of months. It is the board-approved floor that tells the company when to slow spending, seek lawful capital, notify a lender, change the launch plan, or involve counsel, a CPA, the plan administrator, a valuation professional, or the lender. ^{[5][8][9][10]}

The examples below are hypothetical stress tests, not safe harbors. Each one states inputs, arithmetic, and interpretation so another reader can reproduce the result and see where cash ownership or timing changes the answer.

Governance gives the forecast an accountable decision process. It records who reviewed cash, what was restricted, what changed, which source documents support the decision, and why the company continued, slowed, or stopped a planned cash move. ^[1][5][6][7]

The largest planning risk is launching with too little unrestricted cash after the transaction closes. The IRS ROBS project reported that many examined businesses failed or were on the road to failure, with some owners losing both the business and retirement savings. That finding does not mean every ROBS business fails, but it makes undercapitalization and retirement concentration central planning issues. ^[1][2]

Before treating a ROBS-funded business as capitalized, collect the documents that prove each cash bucket: rollover verification, plan trust records, stock purchase documents, corporate bank statements, closing statement, lender authorization, payroll schedule, tax-remittance schedule, vendor commitments, customer collection assumptions, and the board-approved minimum-cash trigger. ^{[1][2][4][5][8][9][10]}

These answers address recurring working-capital questions. They are framed as planning guidance, not individualized approval for a specific transaction.

All ten official sources below were re-opened for this update. The notes state how each source supports the article and where its scope is limited.

1. IRS ROBS Compliance Project

   Re-opened July 31, 2026. The IRS describes ROBS as a structure in which a plan uses rollover assets to buy stock of a new C corporation, warns that determination letters do not approve operation, identifies record requests, notes valuation issues, and reports business failures and retirement losses.

2. IRS ROBS examination guidelines

   Re-opened July 31, 2026. The IRS memorandum describes the sequence from C corporation to qualified plan, rollover trust account, employer-stock purchase, corporate proceeds, case-by-case development, valuation concerns, and prohibited-transaction issues.

3. IRS rollovers of retirement plan and IRA distributions

   Re-opened July 31, 2026. Used for direct rollovers, trustee-to-trustee transfers, 60-day rollovers, withholding boundaries, eligible rollover distributions, and why ROBS funding should not be framed as a personal withdrawal.

4. IRS verifying rollover contributions to plans

   Re-opened July 31, 2026. Used for plan-administrator verification of source, type, timing, check or wire source, and plan acceptance before rollover cash is treated as valid plan trust money.

5. DOL Meeting Your Fiduciary Responsibilities

   Re-opened July 31, 2026. Used for written plan, trust, recordkeeping, fiduciary prudence, documentation, service-provider monitoring, reasonable expenses, prohibited transactions, employer-stock monitoring, disclosures, Form 5500, and bonding.

6. ERISA section 406 prohibited transactions

   Re-opened July 31, 2026. Used for sale, exchange, lending, furnishing goods or services, transfer or use of plan assets for a party in interest, and fiduciary self-dealing boundaries.

7. ERISA section 407 employer securities

   Re-opened July 31, 2026. Used for qualifying employer-security concepts, eligible individual account plan context, fair-market-value limits in non-exempt settings, and employer-stock monitoring boundaries.

8. SBA Plan Your Business

   Re-opened July 31, 2026. Used for startup-cost planning, one-time versus monthly expenses, break-even and funding request context, monthly projections, cost structure, revenue streams, and business-plan finance categories.

9. SBA Manage Your Business

   Re-opened July 31, 2026. Used for balance sheet, cash-flow projection, accrual versus cash, accounts receivable, accounts payable, available cash, bank reconciliation, payroll, tax obligations, and employee payment planning.

10. SBA 7(a) loans

    Re-opened July 31, 2026. Used for lender-process context, working-capital loan uses, monthly repayment from business cash flow, and why lender restrictions belong in a separate cash bucket.