Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
For many years I owned a small business and have contributed some retirement funds in a SEP. In September of 1997 I incorporated taking on a partner. I licensed my old company name (trademarked and registered) and business techniques to the new corporation. Since then, neither my partner nor I have taken any income out of the corporation, but I do receive a monthly royalty as agreed to in the licensing agreement

My question is how do I treat this royalty payment, and how can I shelter some of this income? Is it considered earned income? I was told that somehow capital gains might come into play at some point. Since I am no longer self-employed I assume I will not be eligible to contribute to my SEP Plan. Could I open an IRA at this point if the royalty income is considered earned income? Any other ideas?
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
Live Video Event Monday!
The GP team is hosting a live video event on Monday at 4 p.m. ET. Don't worry if you can't make it — we'll have a replay and a transcript. Click for more!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement