ForumsManaging Employees and HR

In general, it's to your advantage to take out whatever corporate profit you want for yourself as a regular salary the company pays to you, rather than taking it out as a profit distribution. The reason is because your salary is tax deductible for the corporation, and a distribution would effectively be double-taxed.

The Department of Labor defines a salary as any pre-determined amount of compensation that an employee regularly receives for each pay period. So technically, paying yourself varying amounts at irregular intervals would not qualify as a salary. Even so, if the total amount you claimed as salary for the year was reasonable, you'd probably not have any trouble.

Your salary must be deemed reasonable by the IRS, or they may claim you are merely "disguising" your distributions as a salary to avoid taxes.

Yes, your credit score will be a limitation for traditional lenders -- and yes, be wary of the offers you receive from offshore institutions. So your best start-up options may be to work regular jobs and save all you can to launch the business -- or find a partner.

Hope this helps. Best wishes.