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I got the impression from James's post that he wasn't actually "giving up" his millions, he was locking up all future profits in the business and reinvesting them. He converted HotOrNot from an S-corporation to a C-corporation. You can certainly reinvest profits from an S-corporation into the business or pay out profits from a C-corporation as dividends, but the incentives go different ways. S-corp earnings are taxed as ordinary income (none of the double-taxation of corporate profits) and S-corps can't give out different classes of shares, so there's an incentive to distribute the profits out to the shareholders. C-corp earnings are taxed once at the corporate level and then once as dividend earnings, yet they can have multiple classes of shareholders. The incentive is to build up the business and eventually seek an IPO, acquisition, or other liquidity event. It almost looks like James is positioning HotOrNot to get big and get bought.



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