Finally made money now i have to give it away?

[veritas]

What was he thinking?

To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it."
-- Thomas Jefferson

[thomtax]

Veritas

I love your signature line.

[veritas]

Walter Williams

I have been reading his stuff online. By the way it's my latest source for quotes.

Boortz's agreement is OK & I like him, but he's an amateur.
I hope Thomas Sowell & Walter Williams would approve.

[Bees Knees]

So far, Gabriele hit the nail on the head.

We often think of LLC and S corporation as the only choice. But in a case where a business strikes it rich with huge profits and only two owners to spread the wealth around (the business guy and the government), the C corporation is the way to go.

C corporations generally pay a lower rate of tax on their profits than individuals making the same money. The individual owner is not taxed until the corporation distributes profits. But in your case where the business wants to expand, the tax to the individual can be deferred many years.

Then once the business does start to distribute profits, it may be taxed at the lower capital gain rates for qualified dividends. Or if the business is eventually sold to mega corporation, the lower capital gain rates apply to the sale of the C corporation stock.

At any rate, whether it is a qualified dividend or long term capital gain on the sale of stock, the individual does not get soaked for the 42% rate as the business is earning profits. The combined corporate and individual rates may eventually add up to more than 42%, but that is after the business has had a chance to use the governments tax money for years in expansion.

[Lion]

Sit down with advisors

Sit down with advisors now, not in December or during tax season. Are you ripe to be a C-Corporation? Do you have a spouse &/or children to hire in whatever entity you choose? Consider a defined benefit retirement plan, expensive to set up but you can defer so much more. At least, step up to a 401(k) or SEP with higher limits than your current Roth IRA. A C-Corp would let the corporation deduct health care premiums and other fringe benefits without you paying self-employment or payroll taxes on most. Do you have an accountable reimbursement plan in place so qualified reimbursements don't get included in profits? Can you defer some year-end invoicing into 2008? And, accelerate purchasing into 2007? Have you used up all your prior year NOLs? Some of these are minor amounts or just timing, but until you choose which business entity meets your needs now and going forward, neither we nor your current advisers can help you structure your income and expenses to be subject to the least tax. What state are you in? You're going to need to invest in some business financial planning with a team of tax advisor, lawyer, etc. Invite them to serve on your board of directors. Talk to your friendly, local experts. (Friendly is not a requirement, however.)

[dsi]

As it has been said, find yourself a very knowledgable accountant and pay the appropriate fees for consultation. You are only cheating yourself if you don't.

[JoshinNC]

where have you gone telecomguy?

Some of the posters have provided good advice, but trying to piecemeal it together without professional assistance would be a disservice. You would be best advised to work with a local professional who access to the things that you will need. You will likely need to work with several professionals (accoutant, attorney, investment advisor) to develop, implement and MAINTAIN a plan that is in your best interest. If you can give us an idea of where you are located in the country I am sure either someone on the board can work with you or put you in place with someone close to you.