Save money in company for next year
I have a small LLC that files as a C corporation.
The company has had a good year and will have around 0k in the bank in December after paying all expenses and salaries for this year.
However, a big, profitable project has finished without anything similar in the pipeline, so next year will be lean; I also expect to have a lot of new software product development expenses (R&D). Instead of paying that surplus to myself as a bonus and thus paying personal taxes on it, I would like to "save" the money in the company for next year's expenses, where it will be used up. But if I leave it in the bank at year-end, it will be subject to the massive corporate income tax rate of 30-40%.
The accountant says I have to pay that money to myself, pay the personal taxes, and then put the remaining money right back into the company next year.
Is there no way for a small business to save money for known future expenses?
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As was once famously said,
Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.
—?Benjamin Franklin, 1789
It's very likely that either the company or you personally is going to have to pay taxes on that money. Really the only way to avoid it would be if the company spent that money on next year's expenses, and paid the bill before the end of this year. Of course you can only do that if the recipient is willing to receive their money so far in advance, which isn't necessarily the case since they would pay more taxes this year as a result.
As for whether it's better to have the company pay the tax or for you to do as your accountant suggests, there are a lot of factors that go into that equation, and my gut feeling is that your accountant already ran it both ways and is suggesting the better choice.
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