Rollovers as Business Start-Ups
Okay kiddo, imagine you have a big piggy bank where you put all your pocket money. You've been saving for a really long time and you now have a lot of coins and bills in your piggy bank. You've decided that you want to use that money to start a lemonade stand business in your neighborhood.
Now, imagine that instead of taking all the money out of your piggy bank and putting it into a new bank account to start your business, you decide to keep the money in your piggy bank and start your business from there. This is kind of what a "rollover as business start-up" (ROBS) is.
A ROBS is a way for people who have a lot of money in their retirement accounts (like 401ks or IRAs) to use that money to start a business without having to pay penalties or taxes for withdrawing the money early. Instead of taking the money out of their retirement account and paying taxes on it, they move the money from the retirement account into a new account that they use to start their business.
This way, they can use the money they have saved up in their retirement account to invest in their own business and hopefully make even more money. It's kind of like using the money in your piggy bank to start your lemonade stand business, but without having to pay any taxes or penalties for taking the money out.
However, it's important to remember that using a ROBS can be risky and complicated, and it's not always the best option for everyone. It's important to talk to a grown-up financial planner or advisor before using a ROBS, to make sure it's the right choice for you and your business.
Now, imagine that instead of taking all the money out of your piggy bank and putting it into a new bank account to start your business, you decide to keep the money in your piggy bank and start your business from there. This is kind of what a "rollover as business start-up" (ROBS) is.
A ROBS is a way for people who have a lot of money in their retirement accounts (like 401ks or IRAs) to use that money to start a business without having to pay penalties or taxes for withdrawing the money early. Instead of taking the money out of their retirement account and paying taxes on it, they move the money from the retirement account into a new account that they use to start their business.
This way, they can use the money they have saved up in their retirement account to invest in their own business and hopefully make even more money. It's kind of like using the money in your piggy bank to start your lemonade stand business, but without having to pay any taxes or penalties for taking the money out.
However, it's important to remember that using a ROBS can be risky and complicated, and it's not always the best option for everyone. It's important to talk to a grown-up financial planner or advisor before using a ROBS, to make sure it's the right choice for you and your business.
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