How to Structure Your Passive Income Business (Pay Less TAX)

[@TobyMathis]

Do you want to dive deeper into this topic and talk to someone on my team? Schedule your free consultation now. aba.link/lxi

[@Jaden48108]

Nice comprehensive video. Being a veteran on a retirement salary, as well as disability & taking in social security, I'm cool. But it's also good to learn something new.

[@BorselinoThadchack]

it is a very good video, from taxes standpoint. The problem is that most people do not have NEARLY enough money to have any kind of passive business. Hence why, if they have any, they invest in passive indexing. I do love your videos, since I learn a lot , but there are many many people out of a job (as we are going through a downturn) and none if this helps them. However , it does haelp the richer part of the population. But love your videos nonetheless

[@robwin0072]

Toby, please clarify my confusion. When you mention taking a dividend with 0% tax from your S Corp, how do you achieve that? Does the S Corp issue a 1099-DIV for you? I'm often puzzled by this. People have discussed taking half as W-2s from the S Corp and the other half as a distribution. How does one take a distribution? is there a form issued to the person taking the distribution for use on a person's tax return (1040)?

[@TobyMathis]

Great question. Qualified Dividends are taxed at the long-term capital gains rates. However, the come from C-corps, not S-corps. S-Corp profits flow to the shareholders in proportion to their ownership and are taxed at the ordinary tax rates (ie 0-37% federal). Distributions are not generally subject to employment taxes so long a shareholder who works in the business takes a wage or salary. So In your example of someone taxing a W-2 for half and distributions for half, they are doing this because only half of the money they are taking is subject to employment taxes (generally 15.3%). All of those funds are taxable as ordinary income, tho. As far as taking money out, distributions are nothing special - you just write a check or transfer the money. The funds are taxable regardless of whether they are taken out or not because the profits flow down to the shareholder regardless. Hope this helps.

[@robwin0072]

@@TobyMathis thank you very much

[@KevinLyon-c3g]

Which structure would work best for an author planning to publish a book with a publishing company? Thank You. God Is!

[@Steven-vi5nb]

Great vid, question: As a 100% owner of a business, can I be a 100% passive owner if I have both 50% active and 50% passive income? For example, I own 2 backhoes, I rent one backhoe out for passive income and I operate my 2nd backhoe for active income all through the same company. How would I be taxed as an s corp?

[@dianneharris2870]

If I leave my house to to my living trust, when they sell the house is capital gains due? What about a rental property, same question?

[@Steven-vi5nb]

Can you contribute 100% of profits from a passive business to a deferred compensation plan?

[@TobyMathis]

Generally no - you cannot fund any retirement plan from passive income unless you can change its form via a management entity.

[@Steven-vi5nb]

@@TobyMathis Thanks! I have both, a passive disregarded LLC and a Mgmt c corp. If the LLC makes $500k passively, what's the maximum that could shift to the Mgmt co to contribute to a deferred comp plan?

[@WHITELIONNYC]

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