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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 2574
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Is there a way to take capital out of my successful business

Customer Question

Is there a way to take capital out of my successful business (which is S-Corp and I am the sole shareholder) and use it to start another business, before it gets taxed? I want to avoid getting double taxed: I don't want to draw money out as a shareholder-- tax it, then invest it (in a new company), then tax it again. I want to draw it out, invest it, then tax (or take a loss) the remaining funds at the end of tax season.
Submitted: 9 months ago.
Category: Finance
Expert:  Lane replied 9 months ago.

Hi,

...

S-Corps are pass-through entities, which means that any profit each is year is taxed (to the shareholder), regardless of whether that money is physically taken out of business accounts.

...

Any profits not distributed are available without any tax at all.

...

The distributions WILL lower your basis in the S-Corp but are not a taxable event, UNTIL you distributed $ that are in excess of basis.

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