William Rogers - Withdraw cash from closely-held corporation

You just closed your books on 2019 and got that tax shock. Maybe you paid too much, maybe the business had a huge tax bill. Regardless, it’s time to start planning for 2020 and minimize the double taxation that comes with a corporation. So, how can you withdraw cash from a closely held corporation in a tax-smart way?

How do I pay myself from my business?
You pay yourself either with a salary or with an owner’s draw. Which you choose depends on the structure of your business and will have an effect on your personal and business taxes. You pay yourself a salary just like you do an employee, complete with all withholdings. An owner’s draw comes from the business’s profits or capital distributions. In that case, taxes are paid on the personal tax return rather than having withholdings taken in advance.

What is a closely held corporation and does this work?
A closely held corporation is one in which five or fewer shareholders hold more than 50% of the company’s shares. A small business with an “owner” that is also incorporated will typically be a closely held corporation. So, how do you take money out of a corporation?

C Corporations are subject to double-taxation. That means that the business pays taxes on its profits, and the shareholders then pay taxes on their income from the corporation. As the business owner, it’s your job to minimize both of those, for both you and your shareholders.
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