Running a microISV

successfulsoftware.net

20 points·hermitcrab··6 comments

Note that in the US, there are strategies for "paying a small salary and the rest in corporate-taxed dividends", as the author recommends; they involve setting up an S-Corp.

People routinely recommend this is a way to avoid FICA, which applies only to actual payroll. However, the IRS requires you to pay yourself a "reasonable" salary. Taking $10k in salary in $50k in distros is likely to get you audited. During an audit, the IRS gets to decide what your "reasonable" salary actually was.

Not worth it.

In the UK "paying a small salary and the rest in corporate-taxed dividends" is normal practice and completely legitimate to the best of my knowledge. Obviously that might not be the case in other tax jurisdictions. Seek professional advice.

Not a complaint about the article. I liked it. =)

Just clarifying. ;0)

Thats exactly what I do. Indeed, the staff also know it. Basically I have a small salary, but if the company does well then there is profit that I can then use to take out dividends. I have some friends who go even further, but personally I feel that's stepping over the line. I have no problems with paying taxes, but I do like to reduce mine to a sensible level

The 'nuts and bolts' of running a small software company based on the experiences of a UK-based microISV: accountants, banking, tax etc.

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