Last year, I formed a LLC Partnership with a friend. My friend and I both work full-time jobs while we are trying to get our business launched in our spare time.
The nature of our business is such that we receive lump sum payments for specific jobs. Let's say we complete 3 jobs during a year and earn a total of $5,000. If we split our earnings 50/50, we each make $2,500. This amount is not enough to make any significant impact in our personal financial situations. Therefore, we do not wish to take a distribution, but would prefer to keep the money in the company's bank account to reinvest into the businesses at a future date. However, when completing our personal income taxes using online services, we discovered that we had to pay income taxes on this income even though we are not taking distributions at this time.
What is the best way to retain LLC business income for reinvestment without paying taxes, or is the only solution to spend it on deductible expenses prior to December 31st of each year?