Pay Yourself More Later (When the Business Can Afford It)

Advantages
  • Flexible for the business. The business pays you more eventually, but not based on any timetable or loan.
  • Flexible for you. You leave it open how, when, and how much your compensation grows.
  • Shows smart management and long-term commitment. This helps the company survive initially and shows your commitment to its long-term success.
Disadvantages
  • Might look unprofessional or too casual. By not documenting a loan or making things official or having a timetable, this might seem too casual an arrangement.
  • Could create questions or raise red flags. If the arrangement seems too loose, unprofessional, or suspicious, it could invite scrutiny from investors or the IRS.
Deciding Factor
  • How flexible can you be personally about finance and compensation?
  • How supportive is your spouse or partner – if you have one – in case they need to make any sacrifices?
  • How financially solid is your company?
 

Game Plan

  • To know how much salary you need, do a thorough and detailed monthly personal budget.
  • To know how much your company can afford to pay, do a realistic projection of your business’s income and expenses.
  • See if these calculations mesh and where you can make any sacrifices that aren’t too stringent.
  • Get help from your accountant if you need to, and learn about any tax issues surrounding compensation and salary payment terms.
  • Learn more about this and related issues at www.entrepreneur.com.
  • If married or living with a partner, discuss the implications and possible sacrifices your partner or spouse might have to make.
 
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