Public Advice Request : Being Smart about taxes (C-Corp)

November 04, 2024

by a searcher from University of Virginia-Darden - Darden School of Business in Boulder, CO, USA

Hey friends,

First off. I went out there and bought a business about a year and a half ago and it's been really quite fun to run. Lots of work, totally insane at times, and yes I found myself in WAY over my head. Check. This is what I expected.

Unexpectedly, the business has actually made some money. More than I expected in my model. And since I bought this business to sell (asset purchase) I put everything in a C-Corp. Now, I have an attorney, and I know money guys, but I'm curious what "real people" do when they make some money in the early years of the business. If you've been in my shoes before I'd appreciate your thoughts on the following options:

1. Keep the money in the business bank account and pay taxes on it later
2. Pay myself and my family an annual bonus and pay income taxes on it now

Would love your thoughts/intuitions/experience. Thanks!

Reply by a searcher
from Drexel University in Philadelphia, PA, USA

Thanks Luke. Hey Christof, if you have what you need to fund the company based on your strategy (growth, basic working capital needs, etc.) my philosophy is to typically take the distributions. In my opinion, people go way out of their way to avoid taxes which to me feels like cutting your nose off to spite your face. Depends on what you value, but I value building value and wealth over just saving taxes. Hope this helps!

Reply by a searcher
from Emory University in Tucson, AZ, USA

We eliminate our need to solve for #1, #2, or possibly #3 through###-###-#### by engaging our financial/CPA advisors to present us the best options. We generally have the conversation in October so we can plan/execute by year end. Our decision making is often the impact of the tax code combined our short + long term goals.

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