Author Topic: "dead money" in C-Corp  (Read 1291 times)

scottr

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"dead money" in C-Corp
« on: March 05, 2018, 09:54:01 AM »
Help!

I have a c-corp for my business and I a have accumulated some savings in the corp.  I don't want to pay it out to myself as a salary right now as my plan is to retire in a couple of years at which point I will start paying out as a salary.

The question is, what can I do with this cash?  I'd like to invest it as it is "dead" money but am totally confused as to how this works with a c-corp.

Anyone have any knowledge here?

Scott

SeattleCPA

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Re: "dead money" in C-Corp
« Reply #1 on: March 05, 2018, 10:34:55 AM »
Why not pay the money out? It'll be a qualified dividend and subject to low tax rates... maybe zero if you're paying in the 10% or 12% bracket.

scottr

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Re: "dead money" in C-Corp
« Reply #2 on: March 05, 2018, 10:49:31 AM »
Because right now I am NOT in the low tax bracket.

I want to keep my personal income low right now so i can get cheap health care etc.

Once I "retire" i plan to pay it out

But please correct me if i'm wrong. I'm totally confused

- Scott

skuzuker28

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Re: "dead money" in C-Corp
« Reply #3 on: March 05, 2018, 04:41:40 PM »
The C-corp can open a brokerage account, but there aren't special rates for investment income.  Any income will be taxed at 21% (the new Federal corporate rate) plus whatever your state rate is (if applicable).

Any appreciated assets distributed out of the corporation will be subject to the Built-In Gains tax.

chasesfish

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Re: "dead money" in C-Corp
« Reply #4 on: March 05, 2018, 06:29:41 PM »
I second the investment account recommendation. 

You have to pay taxes, but that's the price of success.  It is what it is, "don't let the tail wag the dog" when it comes to taxes, 80% of a gain is better than the dead money sitting in cash.  If you paid yourself a normalized salary over the years, then dividend it out once your taxes drop. 

You could also buy a rental property in your personal name and let the C-Corp do a 100% loan at an interest rate considered reasonable by the IRS.  Borrow to buy an asset with a 7-8% cap rate with an interest rate at 4-5%.  Just random thoughts

scottr

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Re: "dead money" in C-Corp
« Reply #5 on: March 06, 2018, 11:28:51 AM »
Thanks for all your advice!

I am going to post some more questions regarding C-Corp and taxes.

Scott

trollwithamustache

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Re: "dead money" in C-Corp
« Reply #6 on: March 06, 2018, 11:39:32 AM »
whats your accountant say? there may be limits to how much money you leaving in the C corp.

LessIsLess

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Re: "dead money" in C-Corp
« Reply #7 on: March 08, 2018, 07:33:19 AM »
Whatever you do, leaving your cash to rot inside a "C" corp isn't wise.  Deploy it to some productive use.