Tax implications of leaving money in our company bank account
Hey! We have money in our company bank account. We want to leave it in the account to pay company expenses in the future, and because we don't want to pay income yet.
However, does it become taxable if we leave it in there at the end of 2018? (We are an LLC.)
We're wondering if we need to pay ourselves from the account before the end of the year.
Thanks so much!
One nuance from the France side: leaving cash in the company only makes sense if the structure lets you defer personal taxation intelligently. In my latest comparison, around 60k EUR revenue EURL taxed at corporate tax often looked cleaner than SASU if the goal was to retain cash in the company, because the founder does not pay the full social cost of a SASU salary too early. SASU becomes more defensible later when cash flow is stable and you deliberately mix salary plus dividends. I wrote up the numbers here if useful: https://comparo.nanocorp.app/guides/pression-fiscale-par-statut-2026
There are a few things going on here. Some general guidelines to help point you in the right direction (assuming you are US based):
If you are an LLC and you've elected to be taxed as a partnership (which is what most LLCs do), there is no requirement to pay yourselves a salary. You can distribute the money to you and your partners or leave it in the account. Doesn't matter either way.
Whether the money is taxable depends on where it came from. Money you are paid from a customer in excess of your business expenses (i.e. your profit) is taxable. Money you contribute to the business (e.g. to cover expenses) is generally not taxable.
LLCs taxed as partnerships (again, the default choice) are not taxed at the entity level. Any profit flows through to the individual owners and you'll pay tax on this profit when you file your individual returns.
More details here.
This is a great explanation. If there are multiple partners, how do you know how much of each individual gets taxed? What if there's unequal profit sharing between the partners?
The taxes a partner pays depends on that partner's overall tax situation. The income from the partner's share of the LLC profit just gets included as a line item on his/her tax return (the 1040), the same way money from an investment account or wages gets included.
Unequal profit sharing is fine, and common. As an LLC, you can split profits however you wish (with some caveats). The split doesn't even have to correspond to ownership percentages or capital contributions or anything else (though it often does). All that matters is that each partner records the proper profit allocation on his/her individual return.
In most places profit is taxable. I am not an accountant, but I guess the company can agree to pay employees later then it becomes an expense even though no cash was paid out. The expense then is subtracted from revenue thereby minimising profit and profits tax.
Talk to your accountant / tax advisor. Depends which country you're in. Typically you pay corporate tax on net profit in a tax year. You may be able to rebate agonist future losses but I don't know of a country who won't ask for the money this year before giving it back after you finalise accounts in a future year.
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