IF your company is making money, the salary that you pay the CEO (assuming
that you ARE the CEO) is really highly dependent on tax liability.
If you have your company set up as a pass-through tax entity such as a LLC,
S Corporation, or god forbid a plain-jane partnership, then you are getting
taxed directly on the organizations revenues. You need to make sure that
you pay yourself a "living wage" + enough to cover your tax liability on the
organization's revenue. Aside from that, you are just as well off if you
leave the money in the company as if you took the money out of the company.
If you leave money in the company, you still own that money as "equity" in
the company as retained earnings.
On the other hand, if you are set up a C-corp, there are entirely different
considerations as how to determine your salary. We all know that a C-corp
is a non-pass-through tax entity. Therefore, any net profit before taxes
are taxed at the company's tax rate and then taxed again if the company
makes a distribution to you as a stockholder in the form of a dividend.
Your first instinct would be to give yourself a big salary in order to
minimize the tax burden of the company. However, you might find that the
company has a lower tax rate than you do personally. Therefore, there are
circumstances, especially with small closely-held corporations where it
makes most sense to grant yourself a small salary and then give yourself a
big dividend to take advantage of the 15% capital gains tax-rate. There are
also some methods for granting yourself stock options that yield an expense
for the company and at the same time provide a capital gains distribution to
you as an employee.
The bottom line is that the number you pay your CEO should be determined not
only by what your company can currently bear but also upon what will protect
your equity from the taxman. What other company's pay their CEO shouldn't
really figure into the equation. It's more important that you figure out
how to retain your equity/earnings and at the same time provide sufficient
funding for the growth and prosperity of your business.
Larry Yunker
Network Consultant
[EMAIL PROTECTED]
----- Original Message -----
From: "Travis Johnson" <[EMAIL PROTECTED]>
To: "WISPA General List" <[email protected]>
Sent: Thursday, December 14, 2006 7:55 PM
Subject: [WISPA] salary
Hi,
Just taking a quick survey... answer if you can, but be honest... ;)
What is the salary of the CEO of your ISP? Even if you can share the
percentage of that salary compared to annual gross revenue...
Travis
Microserv
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