I highly recommend that you read some of the wise words from wise man Chris Mercer about what is the best use of your assets. He gives shares some useful insight on special dividends in this post.
If you’ve worked to create those profits and retained earnings, it’s really OK to take some of them out and enjoy them as a reward for many years of hard work.
And there are two other reasons to special dividends:
First, there are probably other, more productive uses of the money than having is sit in a bank account or even a money market account, at maybe 1% interest.
Second, if something catastrophic should occur and there is a monstrous judgment against the company, there’s nothing more beautiful to a plaintiff’s lawyer than piles of cash in a bank account.
Issue a special dividend and take some money out of the company. If the company needs cash later, that’s what banks are for, or the shareholders can lend it back. “Don’t put all your eggs in one basket” is still a very good policy.
Estate planning isn’t all about what other people will get when you’ve passed on. It’s also about making the best use of your assets now.
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