Did you know that, as a business owner, you can take a small wage while also taking rather large dividends out of the business?
And do you know why so many small business owners do this?
The personal income tax they pay on money withdrawn from the business as dividends is a lower rate than they would have to pay on business profits.
So it's a simple way to convert business profits into business liabilities while paying a lower tax rate on the money..
A dividend is just money an owner takes out of the business it is not subject to payroll taxes. This is considered a business liability.
Dividends reduce taxable business profits.
It's all 100% perfectly legal but it sure helps demonstrate how screwed up our tax laws are.
I'm sure a majority of small business' do it.
It only makes sense to do it!
If you own a business and do not do this I would ask why not?
Do you have an accountant?
If not I might suggest you get one ;)