Withdrawal of LLC dividends

1. What is the withdrawal of LLC dividends
2. Features of withdrawal of dividends
3. Restrictions on withdrawal of dividends

What is the withdrawal of LLC dividends

If we were to talk about FOP, the issue of withdrawing funds is much simpler – you can transfer funds to a personal card, withdraw at a bank cash register or withdraw from an ATM and spend them in full.

But in LLCs, the process is a little more complicated, because the legislation establishes only a few options for withdrawal of earned funds. The first is receiving funds in the form of wages. The second is the withdrawal of dividends, which is regulated by the Law of Ukraine “On Limited and Additional Liability Companies.

Withdrawal of dividends is possible only for the owner of the company. If the LLC has a net profit, dividends can be received in any amount according to the submitted accounting statements. So, in simple words, a dividend payout is a distribution of a company’s net profit.

Features of withdrawal of dividends

• Withdrawal can be made only once per quarter unless the statute provides otherwise. The articles of association, for example, may stipulate the withdrawal of dividends based on the results of the year. Even if the LLC reports and compiles a balance sheet for the year, internally it is possible to compile financial statements based on the results of the quarter for itself, and on the basis of these statements, distribute the net profit.
• Accrued dividends are not expensed but accrued from retained earnings. Withholding is made from these dividends and payments will be net of taxes.

For LLCs on the general taxation system: after the owner has received dividends, he will additionally be required to pay another 5% of the amount of dividends received.

That is, together to withdraw dividends, it will be necessary to pay 23% (18% income tax +5%).

For LLCs on the simplified taxation system: dividend withdrawal tax of 9% (5% income tax + 9%). That is, together in order to withdraw dividends, it will be necessary to pay 14%. It is impossible to calculate your expenses from a single tax, you need to pay this tax from the entire turnover.

• When dividends are paid, it does not matter who the founders were during the period for which the dividends are distributed. The only thing that matters is who is among the founders at the time when the decision on the distribution of net profit is made.
• The calculation of dividends should be proportional to the share of each of the founders

Restrictions on withdrawal of dividends

The first restriction concerns the ban on the withdrawal of dividends to those founders who did not contribute in full or in part.

If the founder left the company with whom the full settlement has not yet been made, it is also impossible to carry out the procedure for withdrawing dividends. This is the second limitation.

This process is formalized by the minutes of the founders’ meetings. In the protocol, a decision is made on exactly what amount of net profit will be allocated to the payment of dividends. Conditionally, if the net profit is UAH 100,000, you can direct 50, 90, or all 100,000 UAH to such a payment.

In the protocol itself, it is desirable to specify the method by which the payment will be made: cash or non-cash. The non-cash method is more optimal given the restrictions on cash withdrawals by NBU Resolution No. 148.

Importantly! An individual who receives dividends does not report this amount in any way.