Avoid using the master and prototype plan offered by firms that market ROBS. A number of ROBS promoters, he says, are on the IRS watch list.
Have an objective valuation of the stock of the new corporation prepared with supporting detailed analysis. An obvious red flag to the IRS would be the value of the corporate stock being assessed at the amount of funds rolled over into the retirement plan. The lack of a bona fide appraisal would raise questions.
Before purchasing a franchise through promoters charging fees out of the proceeds of the stock purchase, consider whether the promoters can be construed by ERISA or the IRS as fiduciaries rendering investment advice. It may violate IRS rules for a fiduciary to receive a payment from plan assets.
Allow future employees to acquire employer stock. Otherwise, the government might see the plan showing discriminatory favor to highly compensated employees in violation of ERISA rules.
Establish the plan as permanent.
Never pay purely non-business expenses from the plan.