Recent tax law changes offer potentially big benefits to shareholders who want to take cash out of their closely held C corporations without sharing too much with the IRS. You can also achieve the same goal through several time-honored cash-withdrawal strategies. This special report examines today's five best ways to pull cash from your C corporation in the most tax-wise manner.
Strategy 1: Take more as dividends and less as compensation
Old way: 'Zero out' taxable income. Before the 2003 act, the standard strategy to avoid double taxation of C corporation profits was to "zero out" your company's taxable income each year (as much as possible). Paying yourself a salary and a variable year-end bonus amount based on company profits usually does that. (Your C corp can deduct legitimate payments for a shareholder-employee's salary and bonus.)
Of course, you are then taxed on the compensation payments. You'll als...(register to read more)