Can I pay dividend/profit sharing with investors before debt is paid off ?

by a searcher from Harvard University - Harvard Business School

3 years ago

Hi :
   I am wondering what is the best practice to pay the investors for dividends/profit sharing after the acquisition. Does SBA loan prevent it before the debt is paid off? What is the tax consequence for the recipients?

Angela

4 likes
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8 comments

searcher from Indiana University at Bloomington

In addition to being sure you follow your loan covenants, it might be a good idea to discuss the options thoroughly with your investors and your accountant before deciding. Aligning everyone's goals and expectations is a big part of the "correct" solution, since everyone's situation is slightly different. There are many different ways you can use your profits and cashflow. Your CPA (and other advisors) can help you understand the advantages/disadvantages of returning capital versus paying distributions versus accelerating debt repayment versus internal investment.

3 years ago | like reply | 1 like

searcher from University of Southern California

Yes. as long as you make debt payments, they do not care if you take out regular distributions below the line.

3 years ago | like reply | 0 likes

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