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Paying Yourself

Posted by: Rod Kurtz on December 26, 2006

As a small business owner, deciding what to pay yourself can be a tricky question. You don’t want to give yourself so much that you cripple your company or so little that you trigger IRS scrutiny and penalties.

To settle on a suitable salary, you need to understand how your company’s legal structure affects your compensation and taxes. Your salary and bonuses are taxed one way; distributions to you as a shareholder are taxed another way.

Find out what the market rates are for CEOs in your industry and your size of business. Seek advice from the best accountant and lawyer you can find. Your trade association can also be of help in this area.

If you were paid little or nothing in the first years of your business, don’t be ashamed of compensating yourself well when the business is successful. You’ve earned it.

Ken Yancey
CEO
SCORE
Washington, D.C.

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