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My LLC will make 700,000 this year. I want to leave 300,000…

My LLC will make...

My LLC will make 700,000 this year. I want to leave 300,000 in the company as retained earnings for expansion needs this year. Is there any way to do this?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Had no clue we were going to make this much... now I will lose half to taxes and not have the investment money we need for exansion and a new HVac for the whole building.

Accountant's Assistant: Is there anything else important you think the Accountant should know?

Not really

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Answered in 13 minutes by:
3/11/2018
Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7,407
Experience: Extensive Experience with Tax, Financial & Estate Issues
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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.

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Customer reply replied 1 month ago
Thank you so much Stephen! This is really important and we greatly appreciate it.

How does your LLC report for income tax purposes?

Sole Proprietorship, S-Corp or C-Corp.

Which years are you referring to?

Are you referring to earning the money in 2017?

Are you referring to a potential expansion in 2018?

The new tax law has been designed to assist in these very situations, but the benefit only applies if the income & expenditures occur in the same tax year.

If you answer these questions, I can continue.

Steve G.

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Also, what type of business are you in?

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Customer reply replied 1 month ago
How does your LLC report for income tax purposes?Sole Proprietorship,referring to 2017?referring to a potential expansion in 2018. We will be expanding greatly this year but the money came in December 2017! Christmas sales. The 700,000 is in the bank and needed for expansion but worried about being forced to pay half and pull the rest out.The new tax law has been designed to assist in these very situations, but the benefit only applies if the income & expenditures occur in the same tax year.If you answer these questions, I can continue.Steve G.
Customer reply replied 1 month ago
Can I earmark 300,000... have the board vote it in as retained income and delay taxes?

No. Having the board designate it will not affect your taxes.

The bot***** *****ne is that there's nothing you can do after the fact that will not tie up the money so that you can use pre-tax funds for your expansion.

I presume that your sales/income for 2018 will be comparable to 2017.

If so, and you spend money on Equipment, etc. in 2018, you will be able to fully deduct those costs in 2018 and shelter that income from income taxes next year.

Do you have a local CPA on board to give you advice and as a minimum prepare your tax filings? If not, generating that amount of income would easily justify a professional that could address these things "up front" and probably save you a lot of money.

For example, one thing we would normally investigate in a situation you have now for 2017 is to put a substantial amount of funds in a defined benefit retirement plan in order to substantially reduce your tax bill for 2017 and in effect take a large portion of your tax dollars & transfer those into investments in the plan. It's better than paying it all to Uncle Sam.

Also, you should consider switching to S-Corp reporting as there are other benefits to reporting your LLC tax way for income tax purposes.

However, the applicability of any of these matters requires a complete analysis of your financial situation, potential earnings, etc. The best planning is done up front, not after-the-fact.

Unfortunately, what you can do now is very limited and requires the expenditure of funds. You can't preserve the earned income without paying the tax first.

Steve G.

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Let me know if I can respond to any follow-up questions you may have.

Please remember to rate my response as that is the only way the SITE will credit me for assisting you today.

Thanks very much,

Steve G.

Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7,407
Experience: Extensive Experience with Tax, Financial & Estate Issues
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