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How do most business owners whether LLC, S-corp, big and small businesses, shareholders get money out of their endeavours?
Shareholders get dividends, and can sell their stocks. If you own land, you either sell, or rent, but that rent goes to an LLC usually. Small landlords give themselves a position within company and pay themselves a salary.
But what if you own, but dont handle any aspect, have no position within, and hire out for management? This can be anything from franchise fast food, to a grocery store, to a car mechanic shop. Your business is not big enough to trade on exchanges, and is not something you can sell easily.
How do you get money out of it? Is it still through company dividends? I hear people hate that method because gubment taxes too much.
Actually, from my understanding and experience dividends are not taxed high at all. I own 5% of a construction company and get an annual distribution, normally around Christmas. I do my own taxes through an online service, and the tax rate is much lower then my wages. I haven't worked a single hour for the company in 3 years.
It varies depending on the company, the owner and the type of company they have.
We also follow the guidelines and regulations established by the *government* and many of us are quite successful because we know how to spell properly, present ourselves professionally and are taken seriously because of it.
.........But what if you own, but dont handle any aspect, have no position within, and hire out for management? ........and is not something you can sell easily. .......
Unless you have incorporated, you simple take profits. With a corporation you either take salary (consultant fee, board of directors) or dividends.
It's not true that it can't be easily sold. There is a strong market for small business that makes a good profit. If it doesn't make money or you try to get too much for it, at that point it becomes hard to sell. Price it sells for will be based on the earnings it generates.
It depends. Single member S-Corps, LLCs and partnerships can just take distributions. These are tax free return-of-capital that reduce basis in the company. Once basis is zero, any distributions are taxes at the appropriate capital gains rate.
Multi-Shareholder S-Corps are similar but there are a few more rules and distributions have to be evenly spread out among the outstanding shares.
Actually, from my understanding and experience dividends are not taxed high at all. I own 5% of a construction company and get an annual distribution, normally around Christmas. I do my own taxes through an online service, and the tax rate is much lower then my wages. I haven't worked a single hour for the company in 3 years.
W2 income (someone who exchanges their time for money) is the highest taxed income and as someone makes more money, the government wants a higher percentage (bigger chunk). That is one of the reasons why it's so hard for people to improve their living standard by working a second job, overtime or a higher income job.
How do most business owners whether LLC, S-corp, big and small businesses, shareholders get money out of their endeavours?
Shareholders get dividends, and can sell their stocks. If you own land, you either sell, or rent, but that rent goes to an LLC usually. Small landlords give themselves a position within company and pay themselves a salary.
But what if you own, but dont handle any aspect, have no position within, and hire out for management? This can be anything from franchise fast food, to a grocery store, to a car mechanic shop. Your business is not big enough to trade on exchanges, and is not something you can sell easily.
How do you get money out of it? Is it still through company dividends? I hear people hate that method because gubment taxes too much.
Our tax code is 72,000 pages and it is very effective in keeping the American people ignorant to what government does. If government really wanted to help the American people they would simplify the tax code so anyone could understand it. But since that is not the case start learning about taxes and get a CPA to guide you through the maze. Mistakes are costly.
I pay an bookkeeper and a CPA a lot of money to keep me legal. Thank god because when the government smells money you better have all your records together and be able to prove everything. And not a smidgen of corruption.
Legally taking some compensation as dividends from an S-corp is a good way to reduce the tax bite as they aren't subject to FICA or FUTA. Your eventual Social Security check may be impacted negatively if your salary portion of compensation is below the SS yearly maximum.
In my case i wanna know how you can pull money out of an LLC.
I'm planning to start one.
It's just gonna be me.
Do i pick a salary or just get the cash with taxes or what??
Thanks.
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