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.
Need Business Insurance?

Need Business Insurance?

For more than 200 years businesses have trusted The Hartford. We can help you get the right coverage with an online quote.
 
The content displayed is for information only and does not constitute an endorsement by, or represent the view of, The Hartford.
 
Find out more information about third party resources