Salaries

Salaries

Some businesses forgo salaries until they are profitable, but if you are able to start out in the black or borrow startup money, you could pay salaries from the beginning. You can generally set whatever salaries you want in a business with a few exceptions.

Too Low

You cannot set your salary unreasonably low to avoid Social Security and Medicare taxes. For example, if you paid yourself a $10,000 salary but took out $50,000 in profits, the IRS could argue that you underpaid Social Security and Medicare taxes.

Too High

Paying salaries that are too high could be a problem if it would defraud your creditors or investors. Check with your accountant as to what would be considered reasonable in your industry.