builder pays 15% tax not 30% capital gains? i dont understand

[mcwagner]

S-corp distributions (or LLC taxed as S) are tax free.

The tax is paid when the income is passed through from the S to your personal returns.  It is taxed whether you make a distribution (write a check to yourselves) or not.

having said that, S-corp (or LLC taxed as S) income typically is taxed at your personal rates PLUS self employment taxes.  However, if the three of you are employed BY THE LLC, then the LLC income passed through to you can avoid self employment taxes as long as the salaries are reasonable and other criteria are met.

If you're not an employee OF THE LLC, you should be.

[Dave T]

No, S-corp income flows through to your personal tax return and is taxed according to the nature of the income.  In your case, I believe, the distribution in excess of salary is a non-qualified dividend distribution and ordinary income tax rates apply on your personal income tax return.  

$300k in dividend income should put you at or very near the top income tax bracket.

Just my layman's opinion.

[jmbuilder]

Thanks to both for your replies. Guess I need to work on business deductions - maybe an office building or something if we realize huge profits.

ryanpal, was not trying to hijack your thread ;-)

[mcwagner]

S-corp income is taxed when earned.  LLC income in excess of salary is taxed at personal rates, but avoids additional SE tax if the salary is reasonable.

after that, you don't pay additional tax when the income is distributed as cash (as long as you don't distribute more than retained earnings)

If you tax distributions again, it's the same as a C-corp.  One of the main benefits of the S is that you avoid "double taxation".