How much can I take out of my business?
Cash in the bank isn't all yours to take. Enter what's in the account and what it still has to cover, and see how much you can safely take out without leaving the business short.
How the calculation works
Start with the cash in the business's accounts. Take away what the business already owes: card balances, bills due in the next month, and taxes on this year's profit you haven't paid yet. Take away cash you know you'll need soon. Then keep a cushion of a few months' operating costs for the unexpected. Whatever is left is cash the business can spare.
Inside Cratchit, the same number is checked against a 13-week forecast of your cash, so a low point a few weeks out lowers what's safe today.
Common questions
How much cash should a business keep in reserve?
Many owners keep about three months of operating costs. A steady business with predictable income can keep less; a seasonal or fast-growing one may want six months or more.
Why set aside taxes before taking money out?
In a pass-through business, such as an S corp, partnership or sole proprietorship, you owe tax on the profit whether or not you take the cash out. Money set aside for this year's tax isn't really yours to spend.
Should I take it as salary or a distribution?
It depends on how the business is taxed. An S corp owner pays a reasonable salary through payroll and can take the rest as distributions; a sole proprietor or partner takes owner draws. Look up a reasonable salary for your job and state.
What should I do with what's left?
Decide before you take it: pay down debt, fund retirement, or move it toward a family goal. Money that sits in a personal checking account tends to get spent.
Cratchit works this out for each of your companies from your real books, checks it against the next 13 weeks of cash, and shows the salary you can defend. Take a guided tour with the Harpers, a sample family.
Try the demoEducation, not advice. Confirm your numbers with your CPA.