As your business grows and your net worth increases, you have to separate and protect your assets.
Lets say your business is a "C" corporation and your balance sheet shows retained earnings of $100,000. That $100,000 is yours (if you own 100% of the stock). The corporation has already paid state and federal corporate taxes. When you take the money out, you will have to pay personal income tax because "C" corps are taxed twice.
If that $100,000 is sitting there in retained earnings and the corp gets sued and loses, you could lose your $100,000!
What should you do to avoid this? Take the $100,000 out, pay the tax and if you need the remainder for working capital lend it back to the corp.
Put a resolution in the minute book to this effect and have the corp give you an interest bearing note for the money. Then your asset is protected.
If you are an "S" corp, all the money you show in retained earnings is yours. You have already paid the taxes. You can take it out any time you want and pay no taxes.
To protect that money, take it out and if you need it for working capital, lend it back. Do a resolution for the minute book and get an interest bearing note from the corp. Now that asset is protected.
I hope all of you are buying the building you are in. It is great for retirement. But your building should not be owned by the business and should not be owned by you personally. It should be owned by a LLC and you should own the LLC.
Here is why: if you own the building personally and someone is injured and the building is at fault, you are sued. You could lose the building and your home! If the building is owned by the business and someone is injured by the business or the building, you could lose both the building and the business!
You have to build firewalls between your assets to protect them.
