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Paying Yourself a Salary From Your C Corporation - YouTube
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[Music]
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hello everyone and welcome to another
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episode of coffee with carl i am your
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host carl zellner one of the senior
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attorneys here with busin with anderson
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business advisors and i mentioned i
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would talk about when it makes sense to
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take a salary from a c corporation
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there are some circumstances in which i
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would suggest taking a salary from a c
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corporation however you'll want to meet
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with an advisor to make sure you're it's
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the appropriate time for you to do it or
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that there's no other way to accomplish
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your goal as if as in if your
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corporation is already profitable and
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then you want to take a salary out of it
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it it it is subject or could be subject
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to double taxation
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however let's talk a little bit about
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some of the implications of taking a
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salary and how it actually works when
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it's from your own corporation
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so what's nice is if is if you're going
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to take a salary from your c corporation
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got to remember it's going to be a
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deduction to your corporation when they
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pay the salary and then you'll accept it
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and you'll pay your individual tax
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limits as well as your self-employment
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tax on the salary the scenario i'm
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thinking of that i think makes the most
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sense or when it's suggested is if
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you're trying to be more lendable
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and you're trying to qualify for a loan
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and you've talked to your lender and
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your lenders told you what criteria you
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need to meet to make the la the loan
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possible or the loan go as smooth as
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possible and that would require you
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actually showing more w2 income now
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there's a difference between a cns in
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one of my previous videos i discussed
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that the loan process is usually easier
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if you're paying yourself a w-2 out of
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your c-corporation than your
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s-corporation because
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normally the lender will just see the
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w-2 and not dive into your business
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through an s corporation they may see a
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reasonable salary coming out of that s
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corporation
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but
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you may run into issues when they see
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the k1 because then they'll want to dive
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into your business and check the overall
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health of your business as well and a
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lot of times if you're just getting
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started your business may not look that
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appealing
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to a lender
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and so we can control sort of what the
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lender sees in this regard
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but to me when i'm talking about paying
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myself a salary out of my c corporation
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it would be most advisable when i'm
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trying to fit into that box the lenders
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painted the scenario goes something like
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this
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is okay well my lender told me i need to
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be making more in w-2 income
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to qualify for this loan this otherwise
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i'll be looking at another loan that'll
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be charging maybe a higher rate of
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interest or won't be funded as or it
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won't be quite as
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hefty as the loan i'm looking for so in
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this regard i would run the numbers
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meaning i would calculate what i'd be
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paying taxes on my salary for that time
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to qualify for the loan
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and then i would be looking at well okay
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so what's the cost of the financing or
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the cost of the money i'm getting from
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another lender
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and then i would justify it meaning if
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i'm paying maybe i will pay or i would
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pay some additional tax on showing some
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salary
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but if i'm getting a larger loan at a
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cheaper interest rate maybe in that
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scenario makes sense for me to pay a
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little bit of extra tax in on a salary
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to be able to qualify for that loan at a
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better rate so this comes into one of
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the legs of the stool that anderson
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talks about and we talk about our events
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is this actually comes into business
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planning because if i'm only looking at
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the tax side it looks like wow that's a
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terrible idea if i'm just looking at the
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tax side right i'm paying extra taxes to
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receive money out of my corporation
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and from a tax perspective that's a
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knock but if i then take into
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consideration what i'm trying to
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accomplish
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now all of a sudden this makes a lot
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more sense meaning yes i'm taking a
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little bit of a tax hit up front but
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ultimately when i qualify for that loan
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i'm getting cheaper money in regards to
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the amount of interest i'd be paying on
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that loan so then the seesaw or the
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scale shifts in the other direction of
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absolutely i'd rather pay a little bit
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of extra tax up front and get a far
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better or get a better term on the loan
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especially if you think of it on a large
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sum for a loan
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what that interest rate or what that
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interest rate difference would be and
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how that would look
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over that period of time so when we talk
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about talking about taking a salary from
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a c corporation yes there may be double
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doubled quote-unquote double tax
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implications if we take that salary out
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of the corporation but realistically
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it's not when you it's your corporation
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you own
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it's not such a bad deal number one
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number two is when we actually take what
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you're trying to accomplish into account
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it may make sense for it from a dollar
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for dollar basis when we start talking
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about loans interest rates and things
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like that
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so that's it for this episode of carl
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free with carl it's been great being
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with you all again uh as always please
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take advantage of all of our free
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content out there i know i'll be
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tuning in to tax tuesdays because i love
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toby's tax talks
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also like i said always keep up with our
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always welcome to visit us in las vegas
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as well so until next time it's been
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great talking with you thanks for
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joining me with this episode of coffee
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with carl
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[Music]
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you
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