Business owners

[Slaket13]

Anyone know the proper method of paying a dividend to myself? My company is a S Corporation. Just curious, I'm looking to cash in on some of my profits and I don't want to pay it out as a bonus.

 

Suggestions?

[Invader3K]

Anyone know the proper method of paying a dividend to myself? My company is a S Corporation. Just curious, I'm looking to cash in on some of my profits and I don't want to pay it out as a bonus.

 

Suggestions?

 

I wish I knew, but I don't. Not really that familiar with ins and outs of S corps. When in doubt, call an accountant.

[fondybrewfan]

You could probably pay yourself an "after tax" distribution. The distribution itself is not taxable; but it also isn't deducted from the net income you need to report on your personal return from the S Corp through the K-1. You would need to talk to an accountant to know the specific way to complete the transaction though.

[Slaket13]

Thanks for the advice. I already have an accountant, just like to go into things like this informed. I'm not always sure that accountants do much much more than the minimum for me. My accountant doesn't actually work for me so I'm just a weary that they will go out of their way to make sure that from a money standpoint, they are doing the best thing for me.

[Outlander]

Just write a business check to yourself and classify as a distribution, pretty simple actually. Your accountant should be able to give you an estimate what your taxable income will be, also I am assuming you have basis in your company.

[Slaket13]

That seems easy enough. I'll run it by my accountant.

 

Thank you for all the suggestions. It's weird to get some actual responses to questions like this rather than the, "youre Momz own yr buzin55"-type responses I'd expect to see on other forums.

 

I just want to compliment the maturity of everyone on brewerfan.net. It's a refreshing change of pace.

[Point Beer Is Best]

Luckily, as an S-Corp you are treated like a simple partnership and avoid the double taxation of a C-Corp (pay taxes at the corporate level, and then pay the dividend rate on the distribution). You don't pay corporate income tax, so you'll just have to pay taxes on it as if it's a dividend (typically 15% or so, which is probably less than your salaried tax rate, and MUCH less than if it was deemed a bonus which can be around 40%).

[Slaket13]

Yeah, paying it out as a bonus would be a terrible idea. I remember at my last job I had before I started my business. I got a bonus for 5k and actually only received something like $2,700 or something close to that. Brutal.

[FVBrewerFan]

Yeah, paying it out as a bonus would be a terrible idea. I remember at my last job I had before I started my business. I got a bonus for 5k and actually only received something like $2,700 or something close to that. Brutal.

 

 

Apples and oranges. As an employee, you weren't taxed at a different rate. It's just that taxes were withheld at a higher rate, and that comes out in the wash when you did your tax returns.

 

What Point is talking about is how a bonus is treated in an S Corp vs C Corp. And that DOES involve a different amount of tax you would have to pay.

[Slaket13]

Yeah, paying it out as a bonus would be a terrible idea. I remember at my last job I had before I started my business. I got a bonus for 5k and actually only received something like $2,700 or something close to that. Brutal.

 

 

Apples and oranges. As an employee, you weren't taxed at a different rate. It's just that taxes were withheld at a higher rate, and that comes out in the wash when you did your tax returns.

 

What Point is talking about is how a bonus is treated in an S Corp vs C Corp. And that DOES involve a different amount of tax you would have to pay.

 

 

Actually it is quite relevant since I simply asked for the process to write myself a distribution instead of writing myself a bonus(which would be taxed heavily). At no point was a bonus referred to as being treated differently in a S Corp vs C Corp.

 

You see I pay myself a salary. In business there are many ways to pull money out of your business. It's not like when I do a $30k job I get 30k. I get paid only my salary. I was asking how to pull a nice chunk of my profits out in the most tax friendly way possible. This IS where there is a difference between a S Corp and a C corp. I didn't want to pay myself a bonus to do so, so I asked a pretty simple harmless question, hoping to get some good feedback from people. And I did.

[Slaket13]

Btw, I talked my accountant and just cashed in very nicely. Thanks for everyone that was actually helpful.