Here are 5 facts about your profits that will persuade you to take the money and run.
- Only the shareholders in the Annual General Meeting can declare a dividend – If a majority wants to declare a dividend, and it is with your personal interest, it is better to declare it yesterday. Different shareholders have different interests, and the fact that the majority is looking to declare a dividend now, doesn’t mean that they will go for it in a few months.
- company can declare and pay a dividend only where there is a profit – The fact that the company is profitable today, doesn’t mean that it will be in a few months. If an earthquake will ruin your offices or kill your employees and you were not insured, the upcoming lawsuits will turn your bottom line into a big bold red number.
- In some countries you must be able to pay all of your debts after the dividend is declared – It means that if you have $1M in profits that can be declared as dividend today, and tomorrow an angry client will sue you for $1.2M, declaring the dividend today is legal, while declaring it tomorrow is not possible. If you declaring the dividend today, the angry client cannot legally pursue your dividend funds, it is rightfully in your personal bank account.
- You can always lend money to your company – Yes, you already lost the dividend tax, but imagine the risks you saved! You need more funds and you believe that it is worth risking your money for it? Lend it some money, you will also get it back with an interest, and you will pay taxes only on the interest of course.
- When you’re out of money, you manage your cash flow more aggressively – No one gets paid if it is not mandatory for your business. Some suppliers will get paid late. Yes, you will get angry phone calls, and some suppliers will threat that they will cut you off. They won’t, they need you as well. Risk other people money by using the credit they provide you. don’t let anyone hurt your pure divine profits.
All you profitable entrepreneurs out there – Take the money and run. You’ll thank me, even if some suppliers will shout at you on a Friday night. In future posts we will discuss different ways to take the money and run – Like taking it into a different company which is owned 100% by you. This will enable you to delay some taxes and invest your money on bigger assets, with less personal risk.