The Exit Playbook: Getting Paid without Getting Burned by Taxes

Key Takeaways:

1. Strategic Compensation Planning: Paying salaries and offering bonuses to owner-employees can be an effective method for extracting funds from a C Corporation while avoiding the burden of double taxation.
2. Tax-Efficient Benefits: Establishing benefits such as health insurance and 401(k) plans not only supports employees but also serves as a powerful tax-saving strategy for business owners.
3. Real Estate Investment Cautions: While corporations can invest in real estate, direct ownership of residential property within a C Corp can lead to unfavorable tax treatment. Careful planning is essential to avoid pitfalls.
4. Leveraging the QSBS Exemption: The Qualified Small Business Stock (QSBS) exemption allows for the exclusion or deferral of capital gains on the sale of qualified stock—an advantageous opportunity for startup founders and early investors.
5. Importance of CPA-Led Exit Planning: Collaborating with a CPA is critical when preparing for a business exit. Proper tax planning can significantly enhance post-sale outcomes by optimizing entity structure, timing, and available deductions.

 

Chapters:

Timestamp Summary

0:00 Strategies for Extracting Business Value Without Excessive Taxes

2:39 Tax Strategies for Extracting Money from a Business

6:08 Tax Strategies for Selling Assets and Bonus Depreciation

7:34 Qualified Small Business Stock Exemption Benefits and Eligibility

 

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Phillip Washington, Jr. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.