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
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 🙂
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