It just depends. If the profit towards the end of the year isn't too bad, it's possible to pay as much of that out as possible as a bonus to founders and/or emp

It just depends. If the profit towards the end of the year isn't too bad, it's possible to pay as much of that out as possible as a bonus to founders and/or employees. Obviously, the company pays taxes on the wages (state/federal/medicare/etc) and you personally pay income taxes, too. In some cases, this may be a lower, overall tax hit than paying the same amount out to founders as dividends only. It certainly depends on the total amount in question, too. It is possible to also retain most, or all, of the profits at the end of the year within the company. As was stated, though, corporate income taxes must be paid on that. Up to about $75,000, the tax rate is pretty low and not a huge deal but after that, corporate income taxes are pretty steep and as a young business, it's definitely good practice not to give Uncle Sam a dime more than you have to so if you have a huge windfall of profits, you might reconsider whether to retain it all or not. Another option is to report as much expense as possible so as to have deductions against the corporation's income. Naturally, this means spending actual money and giving it to someone else but it also means avoiding tax. So if you can do this with things the business needs (or even paying for some things way in advance and up-front), the loss in the time value of $ is still far less than the tax consequence that otherwise would have been incurred (example: pay for all of your hosting needs 6 months in advance before Dec 31st, provided you are on a cash accounting basis and a calendar fiscal year)