Distributions
Distributions
Distributions are a company’s payment of cash or other assets to its shareholders (in the case of a corporation) or members (in the case of an LLC). The term most often applies to an LLC. Distributions typically are of the company’s profits, and are only made after the company’s other liabilities and obligations are taken care of. Members of a limited liability company may issue themselves a distribution when they have determined that there is more than enough cash in the company to maintain operations, or a distribution could come following a large transaction in which the company generates a lot of revenue – possibly through the sale of all or some of its assets. A member of a limited liability company may choose to compensate themselves as an owner of the business in a number of different ways, and distributions are only one way in which someone can take money out of their company. Another option is for them to pay themselves a salary, but a salary may be taxed at a higher rate than a distribution. It’s always best to discuss these options with an accountant to determine what the most advantageous. Sometimes an LLC will issue mandatory distributions to its members in order for them to pay taxes.