Bonus vs disbursement? need advice on which one is best

[bbhaag]

So this year my business grossed a little over 1.2 million in sales. After the dust settled and all the bills where paid I have around 300k in the bank. My accounted told me I needed to spend some money so I have but I'm still looking at a substantial tax on the business income even after spending money on capitol improvements, maintenance, ect. The way my business is structured is an LLC taxed as an s-corp.

So my my question is I've spent all I can on the business so what is the best way to pass the remaining capitol to me to avoid getting taxed out the ass? Bonus or disbursement?

I know we have a few cpa's around here so I'm looking for a little advice.

 

[gorcorps]

Usually people try to at least put a thin veil over their brag threads

Spend it all on hookers and blow

 

[DaveSimmons]

I'M NOT A CPA! But from personal experience:

Corporate taxes are very high, but both distributions and a bonus are straight gross income taxed at your marginal rate, not something at a lower rate like long term capital gains. Still, 32% is better than 35% I guess.

With a bonus you'd pay social security and medicare taxes, not so for a distribution.

Can you stuff any of the loot into retirement savings? Our company does profit sharing that goes straight to the 401k.

 

[John Connor]

Bonuses are what you get at Dave & Busters man. Throw it all in stock and/or high yeld savings accounts.

J/K I spent half a day at a Holiday Inn.

 

[Red Squirrel]

Maybe buy a bunch of gift cards, wonder if there is a way to write that off as an expense, like to give to customers or something. You could still keep them.

On serious note, charity might be the easiest way out. And at least you're helping a charity in the process. Better they get it than the government.

 

[edro]

Maybe buy a bunch of gift cards, wonder if there is a way to write that off as an expense, like to give to customers or something. You could still keep them.

lol

 

[Jeeebus]

SEP-IRA lets you dump 25% into a retirement account so if you're behind on contributions that is a good way to catch up.

 

[Tweak155]

So this year my business grossed a little over 1.2 million in sales. After the dust settled and all the bills where paid I have around 300k in the bank. My accounted told me I needed to spend some money so I have but I'm still looking at a substantial tax on the business income even after spending money on capitol improvements, maintenance, ect. The way my business is structured is an LLC taxed as an s-corp.

So my my question is I've spent all I can on the business so what is the best way to pass the remaining capitol to me to avoid getting taxed out the ass? Bonus or disbursement?

I know we have a few cpa's around here so I'm looking for a little advice.

Your accountant told you that you need to spend more money, but doesn't know how to field this question? I believe the answer is to get a new accountant.

Grats on the growing business though... I had that once but was glad when it went away, drained all my mental energy.

 

[bbhaag]

Thanks for the information especially about dumping some cash into an IRA. It's one thing I have been slacking over the past few years. I really need to start thinking about long term savings for retirement but I'm only 37 so I got time.

Keep the good ideas coming guys!

 

[Brainonska511]

Thanks for the information especially about dumping some cash into an IRA. It's one thing I have been slacking over the past few years. I really need to start thinking about long term savings for retirement but I'm only 37 so I got time.

Keep the good ideas coming guys!

Only 37, but that money compounds. Better to start early to take advantage of the timeline you have before retiring.

 

[Slew Foot]

If you want to take advantage of an SEP, you have to payroll yourself first. You can transfer up to 25% of your yearly payroll without tax up to around 50k or so.

 

[John Connor]

Maybe buy a bunch of gift cards, wonder if there is a way to write that off as an expense, like to give to customers or something. You could still keep them.

On serious note, charity might be the easiest way out. And at least you're helping a charity in the process. Better they get it than the government.

LMAO! I like your thinking. HAHAHA

 

[John Connor]

Thanks for the information especially about dumping some cash into an IRA. It's one thing I have been slacking over the past few years. I really need to start thinking about long term savings for retirement but I'm only 37 so I got time.

Keep the good ideas coming guys!

There is no age limit to start saving. I would do it now and when you retire you will have a nice stack to do anything you want.

 

[Mai72]

Wasn't it Larry Ellis who didn't take a wage, but got bonuses instead so he could avoid paying taxes?

If I were going with Grant Cardone's playbook I'd invest as much as I could with multi-family apartments. Forget IRAs. Grant just told a story of a wife/husband who took $600k out of their 401k and reinvested it in his multi-family deal. The first year they made $72k. Basically they made 12% on their investment. A 401k ain't gonna pay you a 12% increase in one year. And that investment is only going to increase for this couple. They could be looking at a 30% increase on profit within the next 3 years.

Anyway, that's my long term plan. People need a place to live. That's not going away. Plus owning real estate is tangible. I can feel it and see it. With a 401k I don't know what it's going to do. When the stock market goes into correction mode, there goes your 401. I know this isn't a popular topic with many people because they've been conditioned to follow the masses. Many don't even read books on finances.

This is just my opinion. I teach special education. Everyone talks about their pension, etc. It's peanuts. I'm in this game to make real money and real estate is an easy way to do it. You don't need to be smart, but you do need to do your research. In the end, I'll have passive income generating tens of thousands while everyone else is trying to make their pension and 401k stretch for the remaininder of their lives.

 

[John Connor]

But with property comes the associated maintenance, insurance and all that. I mean you could have some very bad tenants that may trash the place.

 

[DaveSimmons]

I'm in this game to make real money and real estate is an easy way to do it.

My mutual funds and ETFs generate a nice amount of income and growth, and are diversified across hundreds of multinational corporations instead of being tied to a building or two. They also require zero effort, I don't even need to deal with a property management company. This is just my opinion too of course.

 

[Slew Foot]

Dealing with real estate rentals is a PITA. My dividends pay out healthy chunk of low taxed passive income that increases every year and I dont have to think about anything.