Taking Money Out of Your Corporation or LLC

hi Clint Kunz here with Anderson business advisors and in this segment I'm going to talk about how to take money out of your entities be it a corporation or a limited liability company let's face it as you start making money the question then becomes how do I get access to that money do I take it out as a salary does it come out as a distribution does it come out as a loan all of these questions come to mind I'm gonna show you right now what you need to consider when it comes to taking money out of your business let's start with the corporation it's assume that you've created a corporation for yourself okay this is AC corporation or it could be an LLC tax as a C Corp you are right here you are an employee of this corporation so if you have income inside of the corporation one way you can pull money out is through a salary okay so a salary is active income so you're gonna have to pay employment taxes on any income you pull out as a salary now I strongly suggest that when you're ready to take a salary out of your business that you set yourself up on payroll use your bank typically they charge fifty to sixty dollars a month to handle all the payroll reporting for you I think that's the best way to go but you feel comfortable doing it on your own go right ahead so salary is one way to take money out of your corporation again it's taxable to you it's active income and it's subject to employment taxes another way is reimbursement okay so with this what we're looking to do is pay you back for any of the expenses that you've incurred to date to get your business set up or anything that you pay going forwards for the benefit of your business so in order to reimburse yourself you have to keep a list of all these expenses keep a tally and then when your profits come in to the corporation then you'll start reimbursing yourself out in fact when we're talking about work which way we should take money out of our business first off I would start with the reimbursement number one then salary so after you can reimburse yourself all of your start-up expenses and all the expenses you've incurred personally on behalf of your business then switch to salary thing is here I want to get you paid back before we start creating taxable income because a reimbursement is not taxable to you because all you're doing is making yourself whole you spent the money personally for the benefit of your business let's get you that money back as soon as possible now I was recently speaking to someone who thought that they should do this they said Clint I want to reimburse myself as soon as possible for all of my expenses that I've incurred on behalf of my business so this is what I'm gonna do I'm down here I'm gonna take sixty thousand dollars in my own name fund it into my corporation pay myself out of reimbursement to turn around and have money to pay my credit card bill all right if you're looking at that and you're doing this right now wondering why would you do that that's exactly right it doesn't make sense now for some people it does because when you hear this you think wow I got to get the money in to reimburse myself right away so I can pay the credit card bill cuz those statements or expenses need to be attributed to the corp calm down it doesn't need to work that way you can pay that money yourself pay your credit card bill for those expenses personally you do not need to move the money into your corporation just to reimburse yourself it's still considered to be an expense to the corporation even though the corporation did not pay it meaning this you paid it on behalf of your business so you don't need to put money here just to take it right back out the same time put in your own name know what you should do is pay your bills on behalf of your business personally if you don't have any income in your corporation yet keep track of them then when your corporation has income that's what we're looking for when it has income from flipping real estate or from managing other assets that's when you'll start reimbursing yourself you want to reimburse yourself out of income from that business all right so we have talked about salary we've talked about reimbursement the other way you can pull money out of your corporation is through a loan so you can take out a loan that would be number three method in order to pull money out now a loan means just what it sounds your corporation will loan you money but again you're not going to loan yourself money unless you have profits it makes no sense to loan yourself money out of that business and tell there's profits there that is put money into the Corp and loan it back out to yourself that's just a lot of unnecessary paperwork to put that type of structure together another way you can pull money out is through a dividend now with a c-corporation I do not recommend you pay dividends out because with the C corporation you need to be taxed once at the C corporations tax bracket on your profits then when you pay out a dividend you'll be taxed again so I'd be very careful on whether or not you ever pay dividends out of this business typically for most people in this position we are focused on these two right here reimbursements and salaries that's how we pull money out of our corporation now that's from a flipping business how about from a rental business how do we pull money out of that structure well again it really depends on how your structure is created most people are in this situation right here where they have a holding LLC right here and this holding LLC will own other LLC's that have property so this is LLC number one and and I'm not gonna put in land trust in those extra boxes right now because it's not important for the purposes of this discussion this is LLC number two you of course you're down here now the money comes in here it then flows from this LLC into here and then from this LLC down to you as you need it this transfer right here number one from here to here this is called a distribution okay you're not taking salaries there's no salaries in this structure from here to here this payment is called a distribution all right they're all called distributions when you're dealing with LLC's that are not treated as corporations so you're just flowing the money down but you have to have bank accounts for each of these entities if you don't have bank accounts for each of these entities and you won't be able to do this do not take money from here and move it down to here with this type of structure so this is the way you would take money out of your core out of your limited liability company if you have rental property tenants pay the LLC and as you notice in the segment where he discussed how the money flows as far as running a rental business with the tenants you watch that segment if you haven't yet to see how the money comes in but this is how you pull it out now for those of you that have a management corporation set up to manage your rental real estate that might change things a bit if you don't want it flowing down to yourself and you've created a management company over here that manages all of these assets you can always pay a management fee to this company and then that's just income to the corporation and if you forgot how to take money out already just go back to the start of this segment and just watch how to pull money out of your corporation remember it comes out as a salary or a reimbursement from this company so you have different options what we're giving you our outlets on how to gain access to your funds so my name is Clint Kunz with Anderson business advisors and this segment was on how to pull money out of your limited liability company or your corporations thanks guys

Channel: Anderson Business Advisors

Views: 53,965

Rating: 4.9740047 out of 5

Keywords: Real Estate Investor, Moving money out of Corporation, Clint Coons, andersonbusinessadvisors

Id: bnwMR3a-LR0

Length: 7min 28sec (448 seconds)

Published: Thu Sep 22 2016