Oh, the "downside if any" is too long to list. Here is one listing for how to do it:

How Does the Rollovers for Business Start-ups Process Work?

ROBS was made possible by the Employee Retirement Income Security Act of 1974, which passed the responsibility of saving for retirement from employers to employees. It allows new or existing business owners the ability to leverage their 401(k), IRA or other pre-tax retirement funds to start or buy a business as a means to grow their retirement investments.

The Five Basic Steps to Set Up the ROBS Structure

1. Create a new C corporation. (A C corp is the only business entity that allows for the purchase of private stock – an integral step in the ROBS transaction.)
2. The new C corp establishes a retirement plan – often a 401(k).
3. Existing retirement funds are rolled into the new retirement plan.
4. The retirement plan uses the funds to purchase stock, called Qualifying Employer Securities (QES), from the C corporation.
5. The C corporation, now cash-rich, can use the funds to start or buy a small business.