How Business Owners Pay Themselves

They can receive a dividend.

  • A dividend is a sum of money paid regularly (usually quarterly) by a company to its shareholders out of its profits or reserves.
  • It’s not taxed if it’s a return of the capital to the shareholder.
  • It’s usually paid in cash.
  • Owners can have a dividend of stock or other assets.

 


 

They can loan themselves.

  • A shareholder loan is a debt-like form of financing provided by shareholders.
  • The loan must have (1) a stated interest rate, (2) a maturity date, and (3) covenants for non-repayment.
  • If the loan is below-market, it will be treated as some other payment.

 


 

They can do an owner’s draw.

  • An owner’s draw is money taken out of a business by its owners.
  • The draw isn’t taxed at the company-level.
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