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How Will You Pay Yourself?

April 13, 2006

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Like the poet said, let us count the ways — to get money out of your business. And they abound. The form they take often depends on which structure you choose: sole proprietorship, partnership, limited liability company, C corporation, or S corporation.

Each compensation method has its appropriate uses. Inappropriate use of any of them can be detrimental to your business health as well as your personal wealth, tax-wise and otherwise. Among the usual methods are:

• Salary
• Bonuses
• Loans
• Basic fringe benefits
• Retirement benefits
• Life insurance benefits
• Expenses paid by the business
• Dividends
• Rental income
• Delayed compensation
• Family payroll — income shifting

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