I agree contacting a FA office might help clarify things for you.
But I don’t follow the statement above. An S Corp can pay owner-employees W2 wages, yes. But it can also distribute dividends to owners. This is one of the primary advantages of an S Corp, and most owner-employees set a reasonable wage, then distribute remaining income above expenses at their discretion. That income is already taxed whether or not you distribute it; gaining access to the funds is not necessarily a taxable event.
I was referring the OP to the entire discussion about business valuation, not just about SCorps.
Yes, by “statement above” I meant the statement I quoted. I now realize that could also be interpreted as referring to your post but that’s not what I meant. Sorry for any confusion there.
I am limited as to how much money I can take per year in distributions though.
Every February I send my info to my CPA to do my business tax return and then once he files the return in Feb/March he tells me the amount I am allowed to take in distributions for that calendar year. It’s based on my business profits and payroll etc from the previous year.
For example, right now I may have 15k in my business checking account but I’ve already maxed out the amount in distributions for 2023 so if I want any of that money for personal use, I need to write myself a paycheck and have taxes taken out of that amount.
Ah, okay got it now. Thanks. I think if you’re scraping that close to your basis every year it’s all the more support for a simple assets minus liabilities approach. (I’m guessing using that or twoin18’s suggestion would get you to roughly the same place).
If your concern is that the business value will significantly reduce institutional aid, it’s unlikely. Most schools giving good need-based aid have an asset allowance on the business assets similar to but separate from any allowance for parental assets. Your business value is probably below some of those thresholds, just above others perhaps.
These schools will probably want your 1120s every year anyway, so it’s not as if you could hide much.
Well…if you need to do this then so be it.
I hope you get a clear answer about where to put this on your financial aid application forms.
Just an update that I emailed 4 of the colleges my daughter has applied to and received responses from 3 of them. All saying different things!
One said
“Net value of all assets (including liquid assets) owned by the business rather than what it could be sold for”
One said (a CSS school)
“You can put zero for Business Value and will cross reference this with the info on the 1120-S”
One said
"I don’t know what you would include as a business value if any unless for example you had assets or materials that the business owns that could be sold if the business were to dissolve. If that amount is zero then you can put zero. "
Not a surprise.
I say take your best guess and leave it at that. Maybe the $1500 in the business bank account?
To me the problem with putting zero is that it’s not accurate. The business has liquid assets.
That’s why I find assets minus liabilities to make the most sense. You can easily calculate it year after year in a uniform way, and in the absence of a formal definition of business value it’s about as easy as anything else to defend.