Investing money that's sitting in a business account?

transistor said:
Even with an s-corp you have to pay quarterly estimated taxes if you aren't paying yourself everything you make?

What about dividends? Those are supposed to be taxed at a lower rate, right?
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There are no dividends coming from an S corp. Profits are taken out in the form of distributions.

For tax purposes, an S or an LLC essentially doesn't. Any income made in your S corp is no different than you earning it personally. If you have withheld 110% of 2008's liability then you are ok. If not, you gotta catch it up by end of year to avoid penalties.

Definitely go see an accountant.

edit: also maybe ask Sumit if he will accept large consulting fee in order to zero out this year's profits. He keep it in Rupees for you which is safe currency unlike dirty US dollar.
 


exclusivewrites said:
Running expenses through the C corp is obviously the best way to extract profits.. however, that can be risky. You're getting hit with fica, etc drawing out salary via a C corp versus S corp or LLC distributions.

If you're zeroing it out anyway, why have a C as opposed to an S? I can see if you're consistently leaving in 50K or so a year, then it makes sense.. pay the lower first tier C corp tax instead of your effective personal rate via the pass-through. Other than that, I don't see why you have a C.
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Because most of what people say is bullshit. Either he does have a C Corp and just doesn't know what he is doing tax wise or he is just making everything up you just read. What seems more plausible?

Edit : for example look at this gem "My C Corps...never make profit by the time they pay expenses, my salary, bonuses, dividends" - I guess he doesn't know that you don't get to subtract dividends from revenue to determine taxable profit for C-Corps. So once again you really think he has one?

transistor said:
Even with an s-corp you have to pay quarterly estimated taxes if you aren't paying yourself everything you make?

What about dividends? Those are supposed to be taxed at a lower rate, right?
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It's very simple, S-Corp it doesn't matter if you pay yourself. You owe taxes on the full amount of profit the S-Corp makes (revenue - expenses) and it doesn't matter one bit if you pass that money to yourself with a distribution or not. If that profit is over about 50k(I don't know the exact number but it's not high) for the year the IRS expects you to pay quarterly estimates. You will probably have some fees to pay this if you didn't but it's not like they are huge or anything.

S-Corp dividends(distributions) are effectively tax free but only because you have to pay taxes on them as income instead.
 
Because most of what people say is bullshit. Either he does have a C Corp and just doesn't know what he is doing tax wise or he is just making everything up you just read. What seems more plausible?

Edit : for example look at this gem "My C Corps...never make profit by the time they pay expenses, my salary, bonuses, dividends" - I guess he doesn't know that you don't get to subtract dividends from revenue to determine taxable profit for C-Corps. So once again you really think he has one?
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Yeah I just sit around wasting my time making up shit on a message board. Doh!

There are numerous advantages of a c corp to an s corp. C corp shares are easily transferred. A c corp is better if you want to offer employee stock options. The IRS restricts who can own stock in an s corp. A c corp can take more deductions for fringe benefits (health insurance, etc.). I could go on for awhile ...
 
dsiomtw said:
Yeah I just sit around wasting my time making up shit on a message board. Doh!

There are numerous advantages of a c corp to an s corp. C corp shares are easily transferred. A c corp is better if you want to offer employee stock options. The IRS restricts who can own stock in an s corp. A c corp can take more deductions for fringe benefits (health insurance, etc.). I could go on for awhile ...
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Unless you're going to take outside capital, have foreign partners, or go public, there are very few scenarios where a C corp is better than an S corp for a small business. You don't pay FICA on non salary distributions (dividends) from an S corp, which should trump whatever benefit you get from being able to fully deduct health insurance premiums.

If your C corp has never paid any tax then its never had any profits, which means it cannot have paid dividends as they are merely distributions of after tax corporate earnings. That in turn indicates that all payments to you must have been in the form of wages, which are subject to FICA/Medicare at the rate of 15.3% on the first 102k or so. S corps allow you to structure your own compensation to minimize FICA/Medicare tax.

If there are two, three, or more partners involved, the total tax saved can be substantial.

Anyway, OP... you keep mentioning this problem of keeping previous years profits in the same account with the current year profits. This should be a non-issue.

When your accountant does your S Corp tax return, he'll take the revenue you earned this year (most likely the total new revenue you deposited into the bank) and subtract the expenses you paid this year to arrive at the the corp's net income. You don't have to worry about commingling profits from different years. All you need to know for tax purposes is how much you earned / deposited from new revenues in the current year. Once its in the bank account its just money.

Sit down with your accountant and have him explain it to you in detail so you're comfortable. That's what you're paying him for.
 
FICA is pretty much a non issue if you're making good money as it is capped at a pretty low amount like you said. For 2009 I think it's around 106k. So if you make a few mil the amount you pay in FICA on 106k is pretty much irrelevant, and as I mentioned there are numerous advantages of a c corp over an s corp for SOME people. Sorry I didn't mean to say that a c corp is better for everyone ... obviously everyone's situation is different.
 
If i was you i'd be buying up all those cheap forclosure houses that were up for grabs in america for $1. Wait a few years till the the goverments and banks pull the finger out, sell the houses off and BANK.
 
dsiomtw said:
FICA is pretty much a non issue if you're making good money as it is capped at a pretty low amount like you said. For 2009 I think it's around 106k. So if you make a few mil the amount you pay in FICA on 106k is pretty much irrelevant, and as I mentioned there are numerous advantages of a c corp over an s corp for SOME people. Sorry I didn't mean to say that a c corp is better for everyone ... obviously everyone's situation is different.
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If you're making a "few mil" and own the majority of the corp, then you might have issues taking it out as salary. If you are audited, the IRS will gauge your salary against CEO's of like companies. If they feel it is too high, then they will reclassify a (large) portion of your salary as dividends triggering double taxation.

You are correct about non-deductibility of health ins premiums on S corps and LLC's.. that definitely is an advantage of a C. However, there is no benefit as to allowed shareholders.. an LLC can have corporate or foreign shareholders just like a C.

A major downside is the inability to qualify for a long term capital gain within a C corp. If you happen to buy RE, stocks or any other capital assets within your C, then that aspect can end up costing you bigtime in additional taxes. And if you do engage in capital events, make sure you don't lose any money on them or you get the added insult to injury of not being able to deduct cap losses against earned income within a C.
 
Wow, after reading this fucked up incorrect information thread. I recommend you to just talk to your accountant. Just spoke to mine today. :)
 
If you're making a "few mil" and own the majority of the corp, then you might have issues taking it out as salary. If you are audited, the IRS will gauge your salary against CEO's of like companies. If they feel it is too high, then they will reclassify a (large) portion of your salary as dividends triggering double taxation.
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SWIM and many people he knows have been doing it for years with no problems (even being audited). A mil or two is a reasonable salary for the CEO of an Internet advertising company.

A major downside is the inability to qualify for a long term capital gain within a C corp. If you happen to buy RE, stocks or any other capital assets within your C, then that aspect can end up costing you bigtime in additional taxes.
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Absolutely. No one would recommend using a c corp for buying and holding real estate where you'd expect to end up with long term capital gains. I thought we were talking about Internet marketers.

Wow, after reading this fucked up incorrect information thread. I recommend you to just talk to your accountant. Just spoke to mine today.
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Yeah just be sure you find a good one. I'm pretty sure that at least a few people posting in this thread know more about minimizing taxes through the use of legal entities and "loopholes" than your average CPA.
 
nitro_dee said:
If i was you i'd be buying up all those cheap forclosure houses that were up for grabs in america for $1. Wait a few years till the the goverments and banks pull the finger out, sell the houses off and BANK.
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Second this... Get educated and buy... doesn't even have to be all your money, learn how to raise private money - buy smart, buy cash flow, and buy a shit load of them. I always suggest multi-family over SFR's but if you choose RE as your investment vehicle do what you are most comfortable with.

070707 said:
Wow, after reading this fucked up incorrect information thread. I recommend you to just talk to your accountant. Just spoke to mine today. :)
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^^QFT^^ ... seriously. Go read the book Lawyers Are Liars by Mark Kohler and interview a couple CPA's about how they would reduce your income. You might want to add him in that list to interview. Worst 6 words you can ever speak with regards to taxes are "My accountant takes care of it."

With regards to corporations. I only use LLCs and S-Corps

LLC = Hold real estate and produce passive income (Buy and Holds)
SCorp = All my active income (Affiliate Marketing, Short Sales, Wholesaling, Fix and Flips)

Also not often spoke of but look into HSA's (Health Savings Account) as they are tax free and can be invested much like a SD-IRA.
 
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Yes real estate is good investment vehicle. However, I don't think its a good idea for a successful affiliate to start learning all details about real estate investment and go out buy properties by himself, because RE investment is another totally different business itself. There are a lot of traps and landmines if you don't know what you are doing. We should stick with what we are good at and joint venture with professional RE investment companies. Just make sure you find a good one to work with. There are a lot of benefits that way, tax benefits included.

If you want to invest big capital and do everything by yourself, you could end up failing at RE and distract yourself from your core IM business. It takes a lot of time and work to arrange financing, find profitable properties, negotiate deals, complete due diligence and finalize the transactions. And when the purchase is done, the real pain begins with property management (yes it is pain in the ass to manage a portfolio of properties, even if you outsource to professional property management company).

Keep this in mind.
 
coolplay said:
Yes real estate is good investment vehicle. However, I don't think its a good idea for a successful affiliate to learn to invest by himself, because RE investment is another totally different business itself. We should stick with what we are good at and joint venture with professinal RE investment companies. There are a lot of benefits that way.

If you want to invest big capital and do everything by yourself, you could end up failing at RE and distract yourself from your core IM business. It takes a lot of time and work to arrange financing, find profitable properties, negotiate deals, complete due diligence and finalize the transactions. And when the purchase is done, the real pain begins with property management (yes it is pain in the ass to manage a portfolio of properties, even if you outsource to professional property management company).

Keep this in mind.
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Can't there be synergies in investing in berriez farms and penis pill factories?
 
Stick $40,000 or whatever the limit is this year in a SEP-IRA (you pay no taxes on that money)

Prepay accounts like others said. You could bassicly eliminate all of your taxes in a month. (im pretty sure tech you are still supposed to pay but they never even looked into it when i get audited constantly)
 
BigWill said:
Stick $40,000 in an IRA

Prepay accounts like others said. You could bassicly eliminate all of your taxes in a month. (im pretty sure tech you are still supposed to pay but they never even looked into it when i get audited constantly)
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Uh.. there is a max contribution. Good disinformation tho....

ROTH 401k = 16,500 max for 09' I believe.


EDIT: See you edited... and yes, you will pay taxes when it comes out. Better to pay taxes before it goes in and then invest it tax free imho.
 
miketpowell said:
^^ He was talking about a SEP-IRA which is $49,500.
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Yeah, He added the SEP on there.

Was looking through some of my old notes on year end tax planning and found this.

May assist some of you. Yes, it's from 2008 and there have been some changes but still some good info.

kkolawyers.com/client/pdf/webinars/Dec.10.2008.Webinar.Slides.pdf
 
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