Greed <i>Isn't</i> Good
Be careful when deciding what to pay yourself, because Uncle Sam's watching.
When the profits are flowing in, it's often tempting to give yourself a nice, big bonus at the end of the quarter. But you'd better keep your greed at bay if you're organized as a regular corporation: The IRS is going after those business owners who pay themselves too much.
A number of entrepreneurs have ended up in court on the issue, and the IRS has come away with some impressive wins. It has successfully argued that a portion of the compensation taken, including bonuses, should have been declared corporate dividends. When dividends are declared, the owner is taxed twice on the income, once at the corporate level and again when the owner receives the money.
Continue reading this article -- and everything on Entrepreneur!
Become a member to get unlimited access and support the voices you want to hear more from. Get full access to Entrepreneur for just $5!