Need Advice Regarding Excess Cash In My Business

[Chuckinden]

I know there are a lot of you that well versed in finances and investing and I respect reading what you say.

I have too much excess cash sitting in my business account and looking for ways to invest it.

It's been sitting there for years and it just seems like a waste by not putting it work.

I can ask my CPA and probably will, but he will charge me for consultations fees...which is no big deal, but I pay him enough already for "consultation" as it is.

I admit I'm looking to take advantage of "free advice" you guys could offer. I apologize in advance.

 

[CAT Scratch FVR]

Sea Monkeys.

 

[AustinTXCat]

Dupree Mutual Funds. Firm based in Lexington. Began operations out in Harlan years ago. Go with KYTFX. Decent tax-free yield.

KENTUCKY-INCOME – Dupree Mutual Funds

dupree-funds.com

I've invested in KYTFX since 1992 for my daughter's UGMA account. Many other ideas abound.

 

[catlanta33]

What kind of business?

Can reinvest into product, equipment, real estate or hire more folks.

If you had enough cash to buy real estate, prices are inching down but borrowers still not going for super high rates so you could probably find a deal if you pay cash.

Or, you could donate it to a good cause like the Catlanta Pool Fund.

 

[Chuckinden]

What kind of business?

Can reinvest into product, equipment, real estate or hire more folks.

If you had enough cash to buy real estate, prices are inching down but borrowers still not going for super high rates so you could probably find a deal if you pay cash.

Or, you could donate it to a good cause like the Catlanta Pool Fund.

Whorehouse ran by hand.

 

[catlanta33]

Whorehouse ran by hand.

Didn't think that was profitable. Congrats on the hand sex!

 

[Creed Bratton]

Be careful of investing in calling cards.

 

[AIChatGPT]

How much excess cash?

 

[CUJO_1970]

Have you considered investing in plastics?

 

[vhcat70]

Have you considered investing in plastics?

 

[BigBlueDave]

NIL



Do it yourself or pass through to Brady as to add to his pile.

Make it happen. It's an investment in your fandom or something.

 

[DSmith21]

If your business is profitable, I would reinvest the money into it. Buy new equipment that is more productive or can lower cost. Look to buy your real estate if you don't own your location. If none of these will add to your profits, I would have a partial return of capital to shareholders so they can invest it.

 

[Hank Camacho]

With interest rates being abnormally high, it might not be a bad idea to buy a 6 month CD just to park it for a bit and earn some interest before you figure out a more permanent solution.

 

[I am stupid]

Christmas time answer- Invest in employees. Bonus, raise, jackets or stuff like that can boost morale and keep employees around.

Other good suggestions already mentioned are buying real estate (even if price dips after buying it will eventually go back up), or buying new equipment to make even more money.

Or do @Hank Camacho idea, but keep rolling it over until the stock market crashes. Then invest it. This is a long term strategy , but it seems like you don't really need the money. If you do need the money, still do it and when you die you can have stories about how a guy everyone thought was poor died a multi millionaire and left all his money to a penguin reservation or something.

 

[BBBLazing]

If you own the business why don't you pay it to yourself? Didn't you already pay taxes on it the year it was earned?

 

[80 Proof]

I know there are a lot of you that well versed in finances and investing and I respect reading what you say.

I have too much excess cash sitting in my business account and looking for ways to invest it.

It's been sitting there for years and it just seems like a waste by not putting it work.

I can ask my CPA and probably will, but he will charge me for consultations fees...which is no big deal, but I pay him enough already for "consultation" as it is.

I admit I'm looking to take advantage of "free advice" you guys could offer. I apologize in advance.

30 day t-bills currently pay over 5%, that's where I've been putting cash lately. I stagger purchases so not all is invested on the same day.

 

[Hank Camacho]

30 day t-bills currently pay over 5%, that's where I've been putting cash lately. I stagger purchases so not all is invested on the same day.

What platform do you use to buy them?

 

[Creed Bratton]

Christmas time answer- Invest in employees. Bonus, raise, jackets or stuff like that can boost morale and keep employees around.

 

[AIChatGPT]

30 day t-bills currently pay over 5%, that's where I've been putting cash lately. I stagger purchases so not all is invested on the same day.

This seems to be the play. I’ve got a business with about 40K just sitting there that I don’t really need to touch unless things got bad.

I mean, 30K at 5% become $31,500 after a month. Reinvest that monthly at in 1 year it is at $51K

Seems too easy.

Yeah. No way my math is right. Pretty sure it is way wrong

 

[Chuckinden]

If your business is profitable, I would reinvest the money into it. Buy new equipment that is more productive or can lower cost. Look to buy your real estate if you don't own your location. If none of these will add to your profits, I would have a partial return of capital to shareholders so they can invest it.

I absolutely agree with this premise.

I just updated all "electronics" last year and I already own my 3000 sf building and a half acre lot beside it, which I need to develop into something that garners income. Suggestions have been everything from storage units to townhouses.

I reached out to my CPA and he recommends T-bills.

 

[AustinTXCat]

This seems to be the play. I’ve got a business with about 40K just sitting there that I don’t really need to touch unless things got bad.

I mean, 30K at 5% become $31,500 after a month. Reinvest that monthly at in 1 year it is at $51K

Seems too easy.

Umm, no.

 

[CaptainBoogerBuns]

My unit is too large and my wife is too hot. Anyone else experts on this?

 

[Chuckinden]

Umm, no.

Please explain. I respect your advice.

 

[AustinTXCat]

Please explain. I respect your advice.

Thanks.

Annualized yield on $30K in T-Bills = $1500. Monthly rate on $30K works out to $125 per month for that particular amount.

Let me put it this way: US Treasury would go broke if they paid 70% annualized interest on $30K.

 

[AIChatGPT]

The last auction a $100 t bill went for 99.58

So when you cash in at the end of 4 weeks you make 42 cents per 100. So that’s why my math was terrible.

 

[80 Proof]

What platform do you use to buy them?

You have to go through the treasury website.

Home — TreasuryDirect

www.treasurydirect.gov

 

[80 Proof]

This seems to be the play. I’ve got a business with about 40K just sitting there that I don’t really need to touch unless things got bad.

I mean, 30K at 5% become $31,500 after a month. Reinvest that monthly at in 1 year it is at $51K

Seems too easy.

Yeah. No way my math is right. Pretty sure it is way wrong

Interest compounds annually, not monthly. So rhat $30k at 5% would return about $125 per month, or $1500 per year

 

[Chuckinden]

Thanks.

Annualized yield on $30K in T-Bills = $1500. Monthly rate on $30K works out to $125 per month for that particular amount.

Let me put it this way: US Treasury would go broke if they paid 70% annualized interest on $30K.

Where would you advise investing $50-75K out of my business account?

 

[Tskware]

Where would you advise investing $50-75K out of my business account?

I always felt that paying large legal fees was a great use of business cash. It’s fully deductible as an ordinary and necessary expense and saves you a lot of income taxes. Call me anytime for further advice.

 

[80 Proof]

Where would you advise investing $50-75K out of my business account?

Right now, t-bills unless you put it back into growing your company.

Much higher return than you will get at a bank unless you buy a CD that will lock it up for a year+ . Tbills are also guaranteed by the government, so unless the United States collapses, you get your money back in 30 days. You can set it up to automatically buy new tbills when your current ones mature.

 

[AustinTXCat]

You have to go through the treasury website.

Home — TreasuryDirect

www.treasurydirect.gov

Ja, Treasury Direct is where I purchased I-Bonds. Little quirky, but works. Plan on switching over to another treasury investment soon. Maybe 2-year T-Notes.

 

[Tskware]

Seriously, if you retain cash in your business and just park it in CD or T bill, instead of paying it out to the owners, don't you get taxed on it anyway? That is the way it works in Sub S, PLLC, LLCs etc. at least to my understanding of the tax code.

 

[AustinTXCat]

Where would you advise investing $50-75K out of my business account?

Good question. Please take your tax bracket into consideration. On $50K:

30K: Either treasuries or CDs from well-established credit unions. For example, my credit union, RBFCU, pays 4.2% on 35-month CDs.
10K: KYFTX. Mentioned earlier. They've been around since 1941 and since 1963 in Lex. Tax-free returns. Reinvest dividends.
10K: Something like PIMCO High Yield Municipal Bond Fund. Currently yields 4.8%. Again, tax-free. Reinvest dividends.

Idea here is spread risk out. I'm unfamiliar with your tax situation, therefore, your mileage may vary.

Good luck.

 

[80 Proof]

Seriously, if you retain cash in your business and just park it in CD or T bill, instead of paying it out to the owners, don't you get taxed on it anyway? That is the way it works in Sub S, PLLC, LLCs etc. at least to my understanding of the tax code.

You pay tax when you earn the money. So if you've already payed taxes on the base capital, then you only pay taxes on your interest income.

 

[Chuckinden]

Seriously, if you retain cash in your business and just park it in CD or T bill, instead of paying it out to the owners, don't you get taxed on it anyway? That is the way it works in Sub S, PLLC, LLCs etc. at least to my understanding of the tax code.

I'm sure I'm taxed on it because it's income.

My accountant set me up with an S Corp when I started the business years ago.

 

[berniecarbo]

I did CD,s and made about 1600.00 earlier this year. Right now, I have it all back in the business to finance an extreme downsize and move. I'm going from a 20,000 square foot building to doing part time work in the basement of a home I bought in another town. Trying to sell my building, but interest rates are so high that the commercial property market is horrible. Not sure what I will do when the building sells, but right now I am property rich and cash poor.

 

[Creed Bratton]

This seems to be the play. I’ve got a business with about 40K just sitting there that I don’t really need to touch unless things got bad.

I mean, 30K at 5% become $31,500 after a month. Reinvest that monthly at in 1 year it is at $51K

Seems too easy.

Yeah. No way my math is right. Pretty sure it is way wrong

 

[BBBLazing]

Seriously, if you retain cash in your business and just park it in CD or T bill, instead of paying it out to the owners, don't you get taxed on it anyway? That is the way it works in Sub S, PLLC, LLCs etc. at least to my understanding of the tax code.

This was my point earlier. If you already were taxed on it, why not give it to the owners if it is not needed in the company?

 

[WTF Cat]

For context, I'm a financial advisor with 36 years at a major Wall St firm (you've heard of us).

If safety/low volatility are goals, most mutual fund companies have money market funds paying over 5%. Its a daily rate so it will come down as rates start creeping lower... but you have daily liquidity and the best return on short term paper in 15 years+. I use TSPXX, currently at 5.24%

As mentioned above, locking in a 1 yr CD is a solid option also: rates are very likely to be lower 1 year from now so you do bear some reinvestment risk.

Bonds/bond funds will rally next year assuming rates go down (which is likely). You'll earn "coupon plus", which is a fancy way of saying you'll earn the interest rate PLUS some appreciation. Again, a lower risk option (but not as safe as the above 2 options).

If you can stomach equities... well... that's a whole 'nother discussion lol.

BTW, most CPA's are NOT particularly knowledgeable about investment options: its not their area of expertise. Would you ask your attorney for medical advice?

 

[AIChatGPT]

Did your firm receive govt bailouts?