Executives in larger firms often rely on their board of directors and the human resources department to establish pay scales, retirement plans, and health insurance policies. In a small company, these decisions fall to the owner.
While there’s not a one-size-fits-all formula for determining how much to pay yourself as a business owner, here are three factors to consider:
Use the Department of Labor and Small Business Administration websites as additional resources to determine your salary. In the early stages of your business, you probably won’t draw a salary that’s proportional with the higher range of salaries, but at least you’ll learn what’s reasonable.
The IRS is focusing on businesses that do not appear to be paying a reasonable salary in an effort to avoid paying employment taxes. There is little to be gained by spending time fighting the IRS in this area.
Please call if you’d like to discuss what taking a reasonable salary as the owner looks like in your business.
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