Part-time CFO | Should Business Owners Pay Themselves Dividends

If business owners are wondering if they are currently utilizing an efficient tax strategy, a great place to start is to look at their financial statement or a tax return and see if they are being paid either hundred percent in salary or hundred percent in dividends. Since an efficient tax strategy usually contains a mix of both, this may indicate to a business owner that not enough thought has gone into the decision, and they may want a second opinion. When business owners are choosing which part-time CFO they want to work with, they should understand that they should not try to save themselves money by hiring they least expensive professional, because by paying for a great accountant, they can end up saving far more in taxes than they could end up paying and accounting services.

Since this is a multifaceted issue, entrepreneurs need to be ready to divulge a lot of information about their business and about their life, so that the right decision can be made. For example, if an entrepreneur or their spouse is going through a divorce, or is under separation agreement, these things can greatly factor in to how a business owner pays themselves says part time CFO. For example, a dividend strategy may be extremely hard to explain to lawyers and judges during a litigation, so for the duration of the divorce, an entrepreneur may draw a salary, in order for it to be easier to reach an agreement.

Other factors that a business owners part time CFO will take into consideration is if a business owner has any other income thatís unrelated to their business, and how does that income get paid to the entrepreneur. Does the business owner have a spouse, and to the income split with them? Does that spouse have other income as well, and how did they get paid? These questions are all extremely important to understand completely in order for the decision on how business owner should get paid can be made.

Since a business owner needs to take money out of their business somehow, and itís an extremely complex issue, business owners should ensure that they have the best part-time CFO that can work with them to help them make this decision, and then stay on top of the issues so that each year an entrepreneur can utilize the best tax strategies possible.

Many business owners often wonder why they even have to declare salary or dividends in their business and why they canít just write themselves a check says part-time CFO. While it would be really nice for business owners to be able to take money out of their business tax free forever, that is not possible because a business owner will eventually have to pay taxes on the money they take out of their corporation. Business owners should know that there is a difference between the two. Dividends are not deductible from the income of a corporation, because they are a direct withdrawal of the prophets. Because of this, it wonít show up on the income statements of the business. Salary meanwhile, is deductible from their income. Because of these two different methods, the taxes paid on each one, are also different. The decision on which one to choose, or most typically which makes a business owner should use is an extremely important and complex one.

Because this is an extremely complex issue, business owners should work with the best part time CFO that they can find in order to help make this decision. If a business owner has asked the question how they should pay themselves, and got an extremely simplistic answer, that may be a warning sign that not enough thought has gone into answer. This is one of the most common questions that accountants get, and the answer is not so simple. If a business owner finds out that they are getting paid either hundred percent in dividends or in salary, that should be an indication that they are not utilizing the most efficient tax strategy possible.

When business owners are hiring part-time CFO to work with in their business, they should also understand that saving themselves money and accounting fees can end up costing them thousands in taxes later on in their business. Since excellence accountants have studied for many years, and then spent many years getting experience in their field, only experienced accountants will be able to fully understand the issues in order to help the business owner. Business owners should understand that extremely knowledgeable and experienced accountants are not going to be the cheapest, which is the reason why a good accountant is worth their money.

Because of the sheer number of variables that are involved in this decision, business owners should be prepared to answer several questions in their first meeting, and questions about not only the business owner in their business, but their spouse, children and family, and there home are just some of the questions that will be considered by their part-time CFO. However, by answering all the questions, business owners should be satisfied that they will get an answer that not only works for them well, but will help save them and their business lots of money.