Business owner: how to determine your wages?

To determine his/her salary, the entrepreneur has several options. Depending on their status, they can choose to pay a salary, distribute dividends or receive benefits in kind.

Determining the entrepreneur’s pay

The cash flow of the company should determine the amount of the manager’s remuneration. This data is obtained by adding net income to all net expenses without affecting cash flow. When the weight of the short and medium-term development strategy is subtracted from this number, the manager will have the amount available for his/her remuneration. Once the amount is determined, it remains to be seen in what form the payment will be made because the burden of dividends is lower than that of salary. For example, they are not subject to generalized social and the repayment of the social debt contributions. They must pay income tax.

The choice of contractual status to determine your pay

Depending on the legal form of cooperation between entrepreneurs, the method of remuneration is different. Financially, regardless of the status, remuneration will be taxed in the same way. However, the cost depends on whether the manager is an employee or self-employed. In terms of social security contributions, self-employed persons pay 30%, while employees pay 60%. On the other hand, when the entrepreneur is self-employed (TNS), the social security and unemployment insurance benefits are much lower. Therefore, there is a need to find an activity-based state that allows for favourable rewards while protecting entrepreneurs.

The choice of the payment method

The payment of a fixed salary is the first choice for entrepreneurs. The payment of staff performing management functions can be fixed in the company’s articles of association. Usually, these stipulate that the manager will be paid and voted on at the meeting. To obtain voting rights, more than 50% of the shares are required. The amount of the salary is free, but there are restrictions: the tax authorities make sure that the amount is not too high, as it will be a hidden way to collect the company’s profits.

For the remuneration of the head of the company to be considered normal, it must be consistent with the actual work of the head. Entrepreneurs can choose to pay themselves dividends. A part of the profits generated is called dividends. They are received based on their shares of capital. Compared to paying salaries, dividends can save taxes more effectively.