corporate dividends - Posted by DavidV

Posted by Nate on February 25, 2001 at 14:51:34:

No corporation ever has to pay dividends. In fact, most of the S&P 500 do not pay a dividend at all. The key is that the money left in the corp. must be necessary for the conduct of the business - i.e. must be reinvested, it can’t just sit in a surplus bank account unless there is a good reason - such as a future expense you are likely to incur.

A good accountant can guide you on this.

corporate dividends - Posted by DavidV

Posted by DavidV on February 25, 2001 at 01:23:35:

Anyone ever heard of the IRS reclassifying some of ones salary as a dividend because of the dividend being too small? Guess i’m trying to figure out how small of a dividend i can get away with.

Re: corporate dividends - Posted by TPK

Posted by TPK on February 25, 2001 at 22:03:37:

I believe the IRS will make you pay a dividend if you do not justify keeping retained earnings. Yes, companies do not pay dividends but there is a statement in the annual report (also known as a 10K I think) in the notes to the financials explaining why they aren’t paying dividends or distributing earnings.

One thing that I have learned is that there is no substitute for a good lawyer and a good accountant. Then I don’t have to think about these things.

Re: corporate dividends - Posted by TomC (Md)

Posted by TomC (Md) on February 25, 2001 at 21:10:21:

Hi David,
I think you have this one backwards…Just lke Nate wrote, no company is ever req’d to pay a dividend.

Here’s what you may of heard about:
If your company pays out dividends to you, and you did not pay yourself “reasonable wages” for your work performed then the IRS could reclassify your dividend as regular wages.

The reason for this is that dividend payments are not subject to FICA witholdings, unemployment tax, etc. So the IRS views a high dividend/low salary situation as a method for skirting taxes.