Author Topic: Small Business Owner Needs Your Help!  (Read 610 times)

NOVAMustache

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Small Business Owner Needs Your Help!
« on: February 19, 2019, 05:52:47 AM »
Good morning and first post here,

I am really struggling with some options here so greatly appreciate anyone's wise advise. I have two employees my significant other and myself.

I am Small Business owner that does pretty well though has been wasteful in the past for sure. I am looking at about 20k after expenses and living costs that I can start stashing away.

I can do this in a few different ways, one I can make an S election, and invest on the business side, while paying out to maximize 401k roths, or a Roth IRA, to our employees, I.E. myself and my significant other. I am not sure how much sense this makes, but I feel like it could have significant tax savings.

The crux of my question is this, I am 36, with an 8 year goal for retirement, 2.4 mil is my target number: where should I be stashing the crux of my funds with that goal in mind, while doing my best to reduce my tax footprint?

I was thinking set up the S Corp, pay taxable salaries out of that to cover personal expenses and to max out personal 401k Roths (19,000* 2 employees), and Roth IRAs (6,000 * 2 employees), and then keep the rest in the S Corp in diversified bucket of low cost index funds, bonds, reits, etc. (190,000).

Most of what I have read has been related to individuals receiving pay checks, versus who are self-employed but not in the "retired" sense of self-employed, like it is more then a job in terms of hours, grind, etc. Well paid but would like to stop doing it as soon as possible and I greatly appreciate your kind advice or sharing of any resources for small business owners looking to maximize income and savings, with a goal of retirement!

SeattleCPA

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Re: Small Business Owner Needs Your Help!
« Reply #1 on: February 20, 2019, 06:19:07 AM »
I don't think you understand how S corporation accounting works.

BTW, an S corporation may save you lots of tax and help you toward financial independence. But to clear up one possible misunderstanding, you don't want to leave appreciating assets inside your S corporation. No benefit to that.

Here's an S corporation FAQ we've done: http://www.scorporationsexplained.com/scorpexplained-faq.htm

It might be worth at least scanning...

Here's a guest blog post I did for the MadFIentist's blog about how S corporations save taxes that might be helpful too.

https://www.madfientist.com/s-corp/


lemonlyman

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Re: Small Business Owner Needs Your Help!
« Reply #2 on: February 20, 2019, 06:49:46 AM »
If you have an solo 401k with just you and your spouse, you can put $19,000 plus 25% of compensation as profit sharing up to $56,000 each.

With an S Corp, you'll be taxed on the profits of the business (without payroll tax). It doesn't matter if you invested the cash on the business side so I'm not sure how keeping those investments on the S Corp balance sheet would help you.

Lamancha

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Re: Small Business Owner Needs Your Help!
« Reply #3 on: February 20, 2019, 08:00:29 PM »
So....If you were to pull all of the extra money out of the s-corp to invest personally,  how hard is it to put back into the company if needed?  Is it as easy as writing the company a check?  I'm new to owning a business too, and I am worried about mixing business and personal money together.

soccerluvof4

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Re: Small Business Owner Needs Your Help!
« Reply #4 on: February 21, 2019, 02:48:02 PM »
So....If you were to pull all of the extra money out of the s-corp to invest personally,  how hard is it to put back into the company if needed?  Is it as easy as writing the company a check?  I'm new to owning a business too, and I am worried about mixing business and personal money together.


If you take it out as income you can (get another opinion on this) I am pretty sure easily borrow it back to the company at prime plus 1 wit hout raising any red flags.