How do dividends work in a small company?

3.20K views

Having watched shark tank, I’m curious how dividends work in small companies. I know the show is nothing like reality, it was just the basis for this question.

If I have a company I had two different early investors- one who has a 10% share and one who has a 15% share, who determines when dividends can be drawn?

If my company gets to a point where it’s earning enough revenue to net 100k profit after reinvesting for growth, what’s to stop me from issuing myself a 100k salary instead of receiving profit in terms of dividends?

In: Economics

4 Answers

Anonymous 0 Comments

Also, depending on your entity type (C-Corp, S-Corp, LLC, etc) you may be required by the IRS to pay yourself a reasonable salary to avoid the appearance of skirting self-employment tax by simply paying yourself distributions instead of pure payroll. Of course, consult your tax advisor-definitely not reddit 🙂

You are viewing 1 out of 4 answers, click here to view all answers.