Some time ago, I started a subscription-based website that has slowly gained momentum and revenue. Currently, my monthly recurring revenue from this site is about $45k USD per month. I’m taking ~$14k/mo salary (which is far more than enough for my needs) and I’m paying one other dev part time about ~$6k/mo. My other expenses to keep it up and running are only ~$2k/mo. That leaves quite a bit leftover and I don’t know what I’m supposed to do with it. I have no desire to expand the operation for many reasons. I’m perfectly happy working on it full time myself and don’t want to change anything. My question is what am I supposed to do with that profit? Claim it all myself as income? Let it accumulate in the business account? The company is formed as an LLC and I am based in the US, for reference.
Ask HN: How do I manage the profit of a successful website?
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Re: Ask HN: How do I manage the profit of a successful website?
#2I am not an accountant, I am not an investment advisor, I am not in the USA. Here are my (random) thoughts.
Extract half for yourself. Invest half of that in stocks and share, put the other half into a pension fund.
The half that's in the business, keep 1/3 as liquid assets, invest the remainder.
Buy advice from a decent investment advisor, pay a proper accountant, put the money to work.
Others will probably respond here with radically different suggestions and tell you why all the above is dangerously wrong, so above all, be aware that you are taking free advice from random people on the internet. It's probably worth what you're paying for it.
Re: Ask HN: How do I manage the profit of a successful website?
#3You should engage the services of an accountant who will advise you the most tax efficient way of managing your money. A good accountant will save you multiple times what he/she charges you in fees.
I'm in the UK, so can't really advise in your case, but here you can invest £40k in a pension fund per year as a business expense.
Re: Ask HN: How do I manage the profit of a successful website?
#4Invest the extra cash, let the money do the work for you.
Re: Ask HN: How do I manage the profit of a successful website?
#5If you have it as an LLC, any profits will pass through to you through your schedule C, and you will be taxed at regular income tax rates. Your accountant will help. But tax optimization can REALLY matter, and as a small business you have massive opportunities to very legally and ethically optimize your business and tax.
Top of mind, what you should really consider is: a) setting up a 401K under the business to shelter some of the income tax free (you can also contribute a significant portion of profit tax free.) Vanguard and Fidelity have no cost single member LLC 401ks that are super simple to set up.
b) thinking of your strategy to invest in this business, or grow another one. Because any expenses are deductible, this is like having ~30% off any business investments courtesy of the federal government.
c) relative to a) above, is if you have a spouse, employ him / her in the business to the extent that you maximize their 401k contribution. (I did this for my spouse and even at $18K a year compounding the 401k has $300K bucks in it!) Again, a small business accountant will be super familiar with how this works.
Re: Ask HN: How do I manage the profit of a successful website?
#6You should engage the services of an accountant who will advise you the most tax efficient way of managing your money. A good accountant will save you multiple times what he/she charges you in fees. I'm in the UK, so can't really advise in your case, but here you can invest £40k in a pension fund per year as a business expense.
This is great advice. There are provisions to allow you to set aside a little over $50K per person under some circumstances (and as the business owner, you have a lot of influence over whether those circumstances apply). If you managed to employ a spouse or family member, you could put away substantial sums for the future in case the fortunes of the site turn downward.
Kudos on the decision of “this is great the way it is”; just make sure you’re stacking firewood for the winter. (Contact the advisor soon, so you might be able to make a 2021 retirement contribution before the filing deadline.)
Specifically ask your advisor is there’s a way you can make these contributions under Roth treatment and what their advise is there. Personally, I’m shooting to have at least 30% of my retirement investments at retirement be Roth so I can control some of my tax exposure then (and I don’t expect taxes to go down in the next 10 years), but if you’re paying for pro advice to your specific situation, pay attention to it not an internet comment based on a few hundred words of unrelated context.
Re: Ask HN: How do I manage the profit of a successful website?
#7How about donating to charity? If you don't need the money, there are people in the world who are struggling to get clean water.
Spend some time to verify that your money goes to a good cause and not to scammers.
You could start by donating to a local sports team to buy equipment to those who can't afford if, for example. Then go see their games to see what you've accomplished.
Re: Ask HN: How do I manage the profit of a successful website?
#8What does the site do out of curiosity.
Re: Ask HN: How do I manage the profit of a successful website?
#9Ignore any advice you read here or elsewhere.
Find a dedicated small business accountant and explain your situation and your desires.
Re: Ask HN: How do I manage the profit of a successful website?
#10Get a financial advisor. I have a friend that was in a similar situation as you. His advisor got him buying rural city tax free municipal bonds, paying in the range of 7%. Such an investment pays 7% interest annually, with a lump sum payment one month a year. His advisor got him with one such bond paying the lump sum for each month of the year. Once he was setup with over $140K per year, tax free, with a termination something like 27 years in the future... he started training his favorite nephew how to be his competition. Last I spoke with him, they'd both graduated mentoring two of the nephew's daughters.