Direct Answer: These Are Different Legal Mechanisms
A ROBS moves eligible retirement assets into a qualified plan sponsored by a C corporation. The plan buys employer stock, the corporation receives stock-purchase cash, and the plan holds employer securities subject to valuation, fiduciary, employee-participation, and filing duties.[5]
A self-directed IRA is still an IRA. It may hold assets a custodian allows, but the IRA owner cannot use IRA assets to capitalize, buy from, lend to, lease with, provide services to, or otherwise benefit the owner’s own business or other disqualified persons without prohibited-transaction risk.[1][2][3] Custodian processing, a checkbook LLC, or an entity wrapper does not convert a prohibited fact pattern into approval.
Decision Boundaries the Tool Enforces
Cost Formulas Use Only User-Entered Numbers
The worksheet uses the same cash-cost formula on both sides when a hard stop does not block the SDIRA side: setup + transaction + (annual administration + annual asset cost) × horizon + exit. The hypothetical foregone-growth line is investment × ((1 + rate)^horizon − 1). Defaults are zero to avoid fabricated provider pricing, and the result does not include tax brackets, UBTI/UDFI tax, valuation invoices not entered, investment performance, business value, bankruptcy risk, or plan-correction costs.
Examples and Exceptions
- Owner-operated startup: the SDIRA side stops because the IRA owner’s current benefit, services, control, or disqualified-person transaction facts must be reviewed before any IRA money moves.
- Independent passive investment: the tool can show needs-review flags and cost arithmetic, but the investor still needs custodian, securities, tax, and prohibited-transaction review.
- Leveraged real estate: debt may create UBTI/UDFI and Form 990-T issues; the tool flags this but does not calculate the tax.[7]
- Precious metals and coins: IRC 408(m) contains narrow exceptions, so the tool stops generic collectibles and sends the exact asset to custodian and tax review.[2]
Frequently Asked Questions
Can a self-directed IRA fund the business I will personally operate?
This tool hard-stops that fact pattern. An IRA is not an interchangeable way to capitalize the IRA owner’s own operating business. IRC 4975 prohibits direct or indirect transactions and use of plan assets involving disqualified persons, and IRC 408(e)(2) can cause an IRA to stop being an IRA when the owner engages in a prohibited transaction.
Does custodian acceptance make an SDIRA investment legal?
No. A custodian or checkbook entity may process or hold assets, but custodian availability is not legal approval of prohibited-transaction, disqualified-person, tax, securities, valuation, or UBTI treatment.
Does the comparison pick ROBS or SDIRA as the winner?
No. It produces flags, uncertainty, verification steps, and user-entered cost formulas. It never scores, ranks, recommends a provider, or states legal eligibility or tax outcomes.
Why does the ROBS side ask about C corporation and qualified-plan status?
The IRS describes the ROBS path as a qualified plan sponsored by a C corporation buying employer stock with rollover assets. That structure is different from an IRA buying assets and different from an LLC, S corporation, or informal operating account.
Use the companion ROBS vs self-directed IRA guide to understand the control and tax rules behind this worksheet.
Sources and Verification
Sources were checked Aug. 12, 2026. They support general federal boundaries only; they do not approve any user’s IRA investment, ROBS transaction, custodian arrangement, valuation, rollover, tax filing, or provider service.
- 26 U.S.C. § 4975
Primary Code text for prohibited transactions, disqualified persons, direct and indirect sale/exchange/leasing/lending/services/use-for-benefit, fiduciary self-dealing, and excise-tax framework. Checked Aug. 12, 2026.
- 26 U.S.C. § 408
Primary Code text for IRA trust requirements, no IRA investment in life insurance contracts, rollover rules, prohibited-transaction consequence under section 408(e)(2), and collectible rules under section 408(m). Checked Aug. 12, 2026.
- IRS retirement plan investments FAQs
IRS explanation that IRAs cannot invest in collectibles, IRA trust funds cannot invest in life insurance, and similar prohibited-transaction rules apply to IRA owners and disqualified persons. Checked Aug. 12, 2026.
- IRS individual retirement arrangements
IRS IRA overview noting IRAs can be set up with banks, financial institutions, insurers, mutual funds, or stockbrokers and linking to IRS materials stating the IRS does not approve IRA investments. Checked Aug. 12, 2026.
- IRS ROBS compliance project
IRS ROBS source describing the C corporation, qualified-plan, rollover, and employer-stock purchase structure plus promoter, valuation, Form 5500/Form 1120, employee-participation, and business-failure concerns. Page last reviewed Nov. 16, 2025; checked Aug. 12, 2026.
- 26 U.S.C. § 1361
Primary Code text for S corporation shareholder eligibility limits relevant when an IRA or plan is proposed as an S corporation shareholder. Checked Aug. 12, 2026.
- 26 U.S.C. §§ 511-514
Primary Code framework for unrelated business taxable income and unrelated debt-financed income, which can matter for leveraged IRA investments. Checked Aug. 12, 2026.