Can You Use a 401(k) to Buy a Business? How ROBS Works

Yes, you can use a 401k to buy a business, and the route is called a ROBS, short for Rollover for Business Startups. It moves money out of a 401(k) or another qualified retirement plan and into a business you own and run, with no early withdrawal penalty and no tax due at the moment of the rollover. What you give up is diversification: your retirement balance stops being a spread of funds and becomes stock in one company.

A ROBS is a long-established, legal funding route, and also the most paperwork-heavy option on the franchise financing menu. It creates obligations that outlive the transaction, so learn the mechanics before you call a provider.

How does a ROBS actually work?

A ROBS is a stock purchase. Nothing is borrowed and nothing is withdrawn. Your retirement plan buys shares of your new company, and the company keeps the cash. The sequence runs in five steps.

• Form a C corporation. This is the step people miss. A retirement plan cannot hold shares in an S corporation, and an LLC has no stock to sell, so the C corp is structurally required.
• The new corporation sponsors a qualified retirement plan, usually a 401(k) with profit sharing, written to permit investment in employer stock.
• You roll your existing balance into that new plan. Traditional 401(k), 403(b) and most rollover IRA balances qualify. Roth IRA money does not.
• The plan buys newly issued shares of the C corporation, a transaction usually described as a purchase of qualified employer securities.
• The corporation now holds the cash and spends it on the business: franchise fee, truck, buildout, working capital.

Because no money left the retirement system, there is no distribution and no penalty. The funds only changed what they are invested in.

What does a ROBS require you to keep doing after the rollover?

The rollover is the easy part. The ongoing obligations turn a ROBS from a transaction into a commitment, and they run for as long as the plan exists.

• The C corporation has to stay a C corporation. Converting to an S corp or an LLC later can unwind the whole structure.
• The plan has to be administered and filed every year, including an annual return for the plan itself.
• Eligible employees have to be allowed to participate. Retirement plans carry non-discrimination rules, so a plan built to hold your stock cannot quietly exclude your crew. For a business staffing 8 to 10 people per zone at the start, that is a real planning item.
• You have to be a genuine employee of the corporation and take a reasonable W-2 salary for the work you do. A ROBS assumes an owner who shows up.
• The stock has to be valued at purchase and usually each year after, because the plan holds an asset with no public market price.

What does a ROBS cost to set up and run?

Providers price a ROBS in two pieces: a one time setup fee to build the structure, and a recurring annual fee to administer the plan. Ask for both in writing, plus the cost to unwind, before you sign anything. Rather than quote figures that vary by provider and by year, here is what drives the bill.

What are the real risks of buying a business with retirement money?

Three risks matter, and none of them are hypothetical.

Concentration. A diversified retirement account becomes a single private holding. If the business struggles, so does the money you were counting on later, and the two are no longer independent.

Compliance. ROBS arrangements have drawn specific attention from the IRS, which has published guidance on where these structures go wrong. A plan that fails the rules can be treated as having made a prohibited transaction, and disqualification is applied backward. That is what makes the annual administration worth paying for rather than skipping.

Finality. If the business does not work, the retirement balance is not recoverable. There is no lender to renegotiate with and no way to put the money back. That is the honest trade a ROBS asks you to make, and we would rather you hear it here than halfway through a discovery process.

How does a ROBS compare to an SBA loan or home equity?

The three routes fail differently, and that is the useful way to compare them. Each column describes structure rather than price, because pricing depends on your credit, your lender, and the year.

Most buyers do not pick one. A ROBS is frequently used as the cash equity a lender wants to see before approving a loan, so it belongs alongside the other options in our full guide to franchise financing rather than instead of them. Veterans weighing an SBA path have a route of their own worth reading first.

What would this look like for a College Hunks Hauling Junk® franchise?

Run the numbers against a real opportunity rather than an abstract one. For the combined Hauling Junk and College Hunks Moving® concept in one zone, the 2026 FDD puts the total estimated initial investment at $193,100 to $345,500 (Item 7), with an initial franchise fee of $65,000 for the combined concept ($32,500 per concept) or $35,000 for a single concept (Item 5). Candidates need a net worth of $200,000 or more and liquid capital of $75,000 or more. Qualified veterans with 51% or greater ownership receive a $3,750 per-concept reduction in the initial fee ($7,500 when both concepts are purchased together).

Two things follow. A rollover rarely covers the whole range on its own, so plan the funding stack rather than a single source. And this is an owner-operator system, which sits comfortably with the ROBS requirement that you work in the business and draw a salary from it. The full investment breakdown shows where every line lands, and if you are still comparing brands, the category-agnostic version of the cost question is a good place to start.

What should you ask before you start a rollover?

Four questions, in this order, will tell you most of what you need to know.

• Ask the provider for the complete fee schedule, setup and annual and unwind, and what happens if you close the business in year two.
• Ask your CPA what a C corporation changes about your personal tax picture, including how you will be paid.
• Ask a retirement plan specialist how the non-discrimination rules will apply once you have a full crew on payroll.
• Ask the franchisor whether a C corporation is acceptable as the franchisee entity and how the agreement handles it. Ours does, and the franchise requirements and process page covers the rest of the qualification questions.

None of the above is tax or legal advice. A ROBS is a structure to build with a CPA and a retirement plan professional who will still be there in year three.

Where to take it from here

If you are weighing whether a College Hunks Hauling Junk franchise fits your goals, talk to the franchise development team and see if your market is still open. We read every inquiry and there is no pressure, just answers.

Financial information shared in this content is drawn from Item 19 of the 2026 CHHJ Franchising, L.L.C. Franchise Disclosure Document (Issuance Date: April 30, 2026, as amended August 26, 2026). See Item 19 for material assumptions, the underlying data set, and full required disclosures. Past performance does not guarantee future results. New franchisees may earn less.

This information is not an offer to sell or solicitation to buy a franchise. A franchise offering can only be made through the delivery of a Franchise Disclosure Document. Certain states regulate the offer and sale of franchises; if you are a resident of one of these states, we will not offer you a franchise unless we have complied with applicable pre-sale registration and disclosure requirements in your state.

College Hunks Hauling Junk®, College Hunks Moving®, and the H.U.N.K.S logo are registered trademarks of CHHJ Franchising, L.L.C. © 2026 CHHJ Franchising, L.L.C. All rights reserved.