How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Stephen G. Your Own Question
Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6182
Experience:  Extensive Experience with Tax, Financial & Estate Issues
30050794
Type Your Tax Question Here...
Stephen G. is online now
A new question is answered every 9 seconds

I own a 11 yr old llc with a sub s elect (s corp). We are

Customer Question

I own a 11 yr old llc with a sub s elect (s corp). We are approaching
$1,000,000 in revenue this year with no outstanding loans.
It is a service based hazmat company with all equipment
Paid in full. All equipment was section 179 deducted each year to reduce
Taxes owed.
I am applying for a business line of credit. Despite the fact that the company has over
$250,000 in equipment, since it has been expensed in the last 2 years through section 179,
I have been told that our company balance sheet is extremely week.
What would be the most expedient way to increase the balance sheet, i.e. company equity and worth.
I will be showing over $250k in profit this year and could leave $150k it in the coffers
Instead of taking a large distribution, however I would rather reinvest it into the company.
I just hate the thought of buying equipment and not expensing for taxes.
Submitted: 1 month ago.
Category: Tax
Expert:  Stephen G. replied 1 month ago.

Hello, my name is***** goal is to give you a complete & accurate answer. I am working on your request now & I will respond as soon as possible.

Expert:  Stephen G. replied 1 month ago.

Well, first of all, the easiest way for you to present a more realistic picture of your Company's financial position is to have your financial statements prepared by a CPA in accordance with Generally Accepted Accounting Principles, on the accrual basis, rather than on a tax basis which is on the same basis as how your tax returns are prepared.

That will reflect your equipment as an asset and subject to depreciation rather than being expensed under IRC 179 for tax purposes.

Also, you are most likely on the cash basis, which disregards ***** ***** assets that you may have not yet realized such as Accounts Receivable, possibly other items of continuing value such as prepaid insurance, etc.

Further, realize that when you say that you could leave $150k in the "coffers" rather than taking a large distribution, that would be the way to re-invest into the Company as of your Balance Sheet date, not taking the distribution as you say that you would "rather re-invest it into the Company". You would only have to leave it there as of your Balance Sheet date to strengthen your Balance Sheet at that point; not a permanent investment in the Company.

As you are approaching $1,000,000. in revenue, as a service oriented company, you really should have accrual basis financial statements which is the norm as your Company begins to mature, which is certainly the case after 11 years in business. A 250K of profit on less than $1,000,000. in revenue, is indicative of a very successful business, and you should not have any problem obtaining a reasonable business line of credit. Banks do not like to lend money to S-Corp's so that the owner-employee can withdraw the profits (that's the way they look at it), rather than leave sufficient equity in the Company to provide ongoing working capital.

Steve G.

Expert:  Stephen G. replied 27 days ago.

Just checking in..............

Have you had a chance to review my response?

Do you have any follow-up questions?

If not, I would appreciate it if you would take a moment to rate my response as that is the only way that I will receive my share of the payment you already made to the site. There is no charge for providing a rating for me.

Thanks very much,

Steve G.

Related Tax Questions