until you try to buy a house
What do you do for work and how much do you make?
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Last: 3 yr ago by EliteZags
Could be true, but in the scenario of being a pass-through - taking a distribution vs salary avoids some taxes, but the assumption is the distribution is so high you probably wouldn't even have a hard time paying for a house in cash. Also your banker should be able to consider your entire financial picture if your distributions / financials are consistent and high.Diggity said:
until you try to buy a house
well yes...if you can pay cash for the home, this won't matter.
as far as considering the "whole picture", that's not been my experience with a typical (government backed) loan.
as far as considering the "whole picture", that's not been my experience with a typical (government backed) loan.
If your business is setup to be a disregarded entity, then there is usually no difference between salary vs distribution. You pay tax on the net income of the company, and your salary is not a deductible expense.
If you are not setup with the company as a disregarded entity, then you are likely paying taxes on some of the money twice. Whether that option is better than the first is a question for the accountants.
Just pointing out that the tax man is going to get you one way or another.
If you are not setup with the company as a disregarded entity, then you are likely paying taxes on some of the money twice. Whether that option is better than the first is a question for the accountants.
Just pointing out that the tax man is going to get you one way or another.
"The absence of the word accountability is not the same as wanting no accountability" -unknown
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
I'm a football player for A&M so my pay is all based on how many of you want to give me money on NIL. My starting price per a hour is $250,000. I only charge $50,000 for sorority parties.
The username "Golf1" is just a cover up.
The username "Golf1" is just a cover up.
More than likely your payroll staff and perhaps also your DBA(s) know too.
And they're the ones who always start the rumors when someone has an egregious salary.
And they're the ones who always start the rumors when someone has an egregious salary.
I'm so lolpoor I can directly contribute to a Roth IRA
I build pipelines - I get paid millions of liberal tears when i am supplying their blue counties with clean natural gas!
All jokes aside - Since 2019 I have a few things going that put me in the 300-350k range each year between work, rent houses, etc. In 2018 if i had made 200k ...then i would have likely never gotten into the path of other income generation.
So reality is that my employer kind of starved me out vs other higher paying postions available to me...instead of money they gave me a free work / life balance and i turned the time into more cash.
All jokes aside - Since 2019 I have a few things going that put me in the 300-350k range each year between work, rent houses, etc. In 2018 if i had made 200k ...then i would have likely never gotten into the path of other income generation.
So reality is that my employer kind of starved me out vs other higher paying postions available to me...instead of money they gave me a free work / life balance and i turned the time into more cash.
Y'all must have some horrible bosses. I think most bosses want to pay their best people the highest salary. Many bosses have some sort of raise restrictions, budgets or something that keeps them from going to bat for every employee every year. Most have to pick their spots.Definitely Not A Cop said:Keeper of The Spirits said:
The reason it's taboo in the workplace is because your employer wants to keep your salary as low as possible. When you find out Bob makes 1.15x it's easier to say pay me like Bob or just start doing .85x the work of Bob.
It also destroys the myth of the meritocracy when you see the bosses favorite pets making more than top contributors
Always and without hesitation discuss salary with your coworkers
Your boss doesn't want to keep your salary as low as possible. He wants to keep everyone's salary low as possible. But he's having to have that conversation with every single person in the company, while you are having it with one. So the odds are always on your side to negotiate higher.
Bosses usually don't pay people more because they like them better. They pay them more because they can negotiate better. Whether you consider that to be part of a meritocracy (I would argue your ability to negotiate better than others DOES make you a more valuable employee), is up to you.
Yes, having good negotiation skills help in getting raises. However, I would always watch out for my super stars. If I had a great negotiator trying to make as much or more of a super star, I either had to get my star more money too OR not go to bat for the good negotiator.
If you are a boss that is too weak to make sure your great employees (especially if they are easy to negotiate salaries with) are better compensated than your average employees, you shouldn't be the boss.
I need your accountant. Mine said salary should be reasonable.
Agree with this, 100%Keeper of The Spirits said:
The reason it's taboo in the workplace is because your employer wants to keep your salary as low as possible. When you find out Bob makes 1.15x it's easier to say pay me like Bob or just start doing .85x the work of Bob.
It also destroys the myth of the meritocracy when you see the bosses favorite pets making more than top contributors
Always and without hesitation discuss salary with your coworkers
I have spent a 27 year legal career at the largest defense contractors and US government agencieshtxag09 said:
Interesting topic in general. My wife works for a major tech company and they encourage their employees to be on the FishBowl app to discuss things like this.
I would assume it's based on the size of their company and some of the wage gap debates/issues that's driving the willingness of the company to be open about it. But also don't think it's a bad thing....
never once have I ever heard people discussing their salaries.
in 27 years.
FICA taxes?fka ftc said:
If your business is setup to be a disregarded entity, then there is usually no difference between salary vs distribution. You pay tax on the net income of the company, and your salary is not a deductible expense.
If you are not setup with the company as a disregarded entity, then you are likely paying taxes on some of the money twice. Whether that option is better than the first is a question for the accountants.
Just pointing out that the tax man is going to get you one way or another.
Negative. Still owe the same if you are disregarded. You can xx is salary and yy is distribution, but IRS doesn't look at it that way.
Again, there are nuances, but that is going to be the general treatment.
Again, there are nuances, but that is going to be the general treatment.
"The absence of the word accountability is not the same as wanting no accountability" -unknown
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
take it to the accounting board - we are here for the humble brags.
If you're on payroll you pay payroll taxes including Social Security. If you take it as an owners distribution that tax is avoided. It's why the IRS says you must pay yourself a reasonable salary. If you're an owner of a business and don't really work in the business, it's better to take a distribution than be on payroll. But that's where the reasonableness comes in, if you're acting as CEO you can't pay yourself $60,000 unless that's normal for your industry. If you come in once a month to review the books as a board member would, you could be on payroll for something much less than a CEO salary.
This.BenTheGoodAg said:
And comp package doesn't tell you everything. Some people give up a lot of intangibles for their salary.
I know I'm behind some of my college friends/peers/other engineers in salary/comp.
But I work 9-4 (that's 25% less than most right there), have damn near ZERO stress or work come home with me, very rarely have any sort of deadline, don't rely on any coworkers to do my job, can come and go from the office as I please, work from home Fridays (and any other day I need to), bring my kids to school everyday, even walk them when weather is nicer, and get home about 45 minutes after they do. I hold a lot of value in all of that. I know many people who make plenty more than me, but they work a lot, and have the associated stresses. My neighbor is an engineer, and so many times on fridays I'm out having drinks with my wife and his at 4pm and our kids playing.. and finally 2-3 hours later, he shows up at 6:30, and he left at 6am that day.
Another big benefit in my mind; I only have 3 weeks vacation, but it's a lax policy where I've taken more than 15 days a few times, and nearly every trip, I work on the plane, or in the car while wife drives, or even a few hours here and there at the destination, so what might be a 7 day trip, I'm only using 3 days, giving me even more times throughout the year to do things with family.
Example, in 2022 we did 5 days in FL at spring break, 10 days in June for a cruise, another 12 days in the Ozarks and TX in June (I was only in the office about 4 days in June), a week road trip to moab/page in Oct, and a 5 day trip to SW CO in Sept. Also had a few 'fun' work trips, flew on private jets to San Diego for golf and fishing and Milwaukee for baseball game and fancy dinner.
All on '3 weeks vacation'
We just did a Fri-Tues trip to mexico in Jan, and I used 1 day.
I'm an Estimator for a General Contractor in commercial construction, primarily industrial warehouse.
I get solicited about 2-3 times a month from a recruiter trying to get me to interview. I'm sure I could switch and make 40% more salary, but at what cost? I've been here almost 8 years and am really happy with my work/life balance.. I can't imagine it getting any better.
Plus I have a path to be partner here in about 5 years, when the only other estimator, a partner, retires.
You are in to some trick territory.Premium said:
If you're on payroll you pay payroll taxes including Social Security. If you take it as an owners distribution that tax is avoided. It's why the IRS says you must pay yourself a reasonable salary. If you're an owner of a business and don't really work in the business, it's better to take a distribution than be on payroll. But that's where the reasonableness comes in, if you're acting as CEO you can't pay yourself $60,000 unless that's normal for your industry. If you come in once a month to review the books as a board member would, you could be on payroll for something much less than a CEO salary.
As mentioned, it all depends how you set your company up, how much you make, and whether you are active or passive in the business.
If you are a passive owner, then if you meet other requirements you may be able to treat all income as capital gains and avoid payroll taxes.
If you are active, there are many more things to consider. Are you a C Corp, S Corp, LLC (single member or partnership - and how did you elect to threat the LLC for tax purposes), etc. Then you will get to a reasonable test on salary taken. Given the subjective nature of this, I would have my ducks and documentation in a row if the IRS comes to visit.
For someone who is pretty successful in small businesses, it can be more prudent to take a higher salary in order to cover more benefits for yourself and stay clear of IRS challenges.
If you are a board member coming in once a month, then why be an employee at all unless necessary for benefits / insurance / 401k / etc. Even then tripping the line of active / passive would make this likely not worth it.
That's all a really long way to say that you should always consult a good, experienced CPA focused on small / medium businesses and these situations.
"The absence of the word accountability is not the same as wanting no accountability" -unknown
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
owned my own company since 2002. made a boatload of money in 2017 and 2018.
nuff said
nuff said
This whole side conversation was started with someone, an owner, being the "lowest paid person on payroll". And I responded "Nice tax strategy"...
Definitely worth having a strategy to minimize taxes, no argument there.
Back to the OP, been involved in small business as an owner for 15 years (been sole owner for past 6) and started a second company as 50/50 owner.
Was planning to retire to part time in next couple of years but we will see. If its interesting and makes money, cool.
Before that I slugged it out in Corp America for 10+ years. Never, ever going back to anything like that.
Back to the OP, been involved in small business as an owner for 15 years (been sole owner for past 6) and started a second company as 50/50 owner.
Was planning to retire to part time in next couple of years but we will see. If its interesting and makes money, cool.
Before that I slugged it out in Corp America for 10+ years. Never, ever going back to anything like that.
"The absence of the word accountability is not the same as wanting no accountability" -unknown
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
"You can never go wrong by staying silent if there is nothing apt to say" -Walter Isaacson
I was going to add that a bosses ability to give a raise is directly proportional to the power of the HR department and they are often zero sum games. As a leader, I always wanted to get my top performers the most salary I could in any given year, but we were extremely limited on how much we could give out. I was never one to want to keep my salaries as low as possible.Troglodyte said:Y'all must have some horrible bosses. I think most bosses want to pay their best people the highest salary. Many bosses have some sort of raise restrictions, budgets or something that keeps them from going to bat for every employee every year. Most have to pick their spots.Definitely Not A Cop said:Keeper of The Spirits said:
The reason it's taboo in the workplace is because your employer wants to keep your salary as low as possible. When you find out Bob makes 1.15x it's easier to say pay me like Bob or just start doing .85x the work of Bob.
It also destroys the myth of the meritocracy when you see the bosses favorite pets making more than top contributors
Always and without hesitation discuss salary with your coworkers
Your boss doesn't want to keep your salary as low as possible. He wants to keep everyone's salary low as possible. But he's having to have that conversation with every single person in the company, while you are having it with one. So the odds are always on your side to negotiate higher.
Bosses usually don't pay people more because they like them better. They pay them more because they can negotiate better. Whether you consider that to be part of a meritocracy (I would argue your ability to negotiate better than others DOES make you a more valuable employee), is up to you.
Yes, having good negotiation skills help in getting raises. However, I would always watch out for my super stars. If I had a great negotiator trying to make as much or more of a super star, I either had to get my star more money too OR not go to bat for the good negotiator.
If you are a boss that is too weak to make sure your great employees (especially if they are easy to negotiate salaries with) are better compensated than your average employees, you shouldn't be the boss.
In my case, the job role had to stay within a reasonable deviation of their peers (if there were any) and we had an overall budget spread across the entire department that was allocated for raises. I could have a worker ask me for a 10% raise which maybe they deserved, but I might only be able to get them 5%. So they either had to be ok with that, or if they weren't, then they could always walk and go find another job.
Nothing I could do about it.
I'm in B2B sales, straight commission. Been with the company 5 years. Top 3 rep the last 3 years.
$475k in 2022
$475k in 2022
Don't want to use my reg account b/c people will think I am making things up, bragging, get their feelings hurt.
Doc x 20 yrs in practice
Yr 1 -400K working 32 hrs/wk
Yr 15 - 600K working 32hrs/wk
Yr 18-20 - 1.5M working 18hrs/wk. I could make 2M if I wanted to work a 40 hr wk. If I stopped working completely would make 1M/yr. I own my practice with other docs working for me.
Rental net income past 5 yrs between 1-300K. But I typically put the $$$ back to improve the homes or buy new homes so doesn't contribute to cash flow. Other RE investment pulls in 100K/yr that I put back to expand this niche.
Doc x 20 yrs in practice
Yr 1 -400K working 32 hrs/wk
Yr 15 - 600K working 32hrs/wk
Yr 18-20 - 1.5M working 18hrs/wk. I could make 2M if I wanted to work a 40 hr wk. If I stopped working completely would make 1M/yr. I own my practice with other docs working for me.
Rental net income past 5 yrs between 1-300K. But I typically put the $$$ back to improve the homes or buy new homes so doesn't contribute to cash flow. Other RE investment pulls in 100K/yr that I put back to expand this niche.
Keeper of The Spirits
Joined:
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AG
If you are subject to HR's limits then you aren't the boss. You are just another cog in the machine.YouBet said:I was going to add that a bosses ability to give a raise is directly proportional to the power of the HR department and they are often zero sum games. As a leader, I always wanted to get my top performers the most salary I could in any given year, but we were extremely limited on how much we could give out. I was never one to want to keep my salaries as low as possible.Troglodyte said:Y'all must have some horrible bosses. I think most bosses want to pay their best people the highest salary. Many bosses have some sort of raise restrictions, budgets or something that keeps them from going to bat for every employee every year. Most have to pick their spots.Definitely Not A Cop said:Keeper of The Spirits said:
The reason it's taboo in the workplace is because your employer wants to keep your salary as low as possible. When you find out Bob makes 1.15x it's easier to say pay me like Bob or just start doing .85x the work of Bob.
It also destroys the myth of the meritocracy when you see the bosses favorite pets making more than top contributors
Always and without hesitation discuss salary with your coworkers
Your boss doesn't want to keep your salary as low as possible. He wants to keep everyone's salary low as possible. But he's having to have that conversation with every single person in the company, while you are having it with one. So the odds are always on your side to negotiate higher.
Bosses usually don't pay people more because they like them better. They pay them more because they can negotiate better. Whether you consider that to be part of a meritocracy (I would argue your ability to negotiate better than others DOES make you a more valuable employee), is up to you.
Yes, having good negotiation skills help in getting raises. However, I would always watch out for my super stars. If I had a great negotiator trying to make as much or more of a super star, I either had to get my star more money too OR not go to bat for the good negotiator.
If you are a boss that is too weak to make sure your great employees (especially if they are easy to negotiate salaries with) are better compensated than your average employees, you shouldn't be the boss.
In my case, the job role had to stay within a reasonable deviation of their peers (if there were any) and we had an overall budget spread across the entire department that was allocated for raises. I could have a worker ask me for a 10% raise which maybe they deserved, but I might only be able to get them 5%. So they either had to be ok with that, or if they weren't, then they could always walk and go find another job.
Nothing I could do about it.
Knowing others salary's + bands allows you to negotiate stronger. In our business the only way to negotiate is to get another offer or leave. Once the work is signed up it's hard to bring it with you.
In general, we have a raise potential of up to 25% within a band and bonus potential of up to 25% not subject to any banding. If you are the top of your band you get bigger bonuses. The numbers are set based on your forced bell curve year end rating. Top rating gets x, middle y, basic c (6-10% raise), below basic get's fired. I have almost always been x or y.
If you were hired in from an external organization you likely make 25% more homegrown until you move up a band, then it even's back out. There isn't a lot of flexibility in the system so 20 people's measurable may all be the same so the boss has to decide which of those 20 get the bigger numbers.
In addition to salary numbers performance evaluations should also be public, so you can see you who should aspire to be like to make the most. I am not unhappy to find out someone makes more, but it does allow me to level set. Do I bust my hump harder even though Bob doesn't and get more? Do I leave and go to a competitor and get my 25% now knowing I'll get leveled out eventually? At the higher bands its much more objective as project margin and revenue are more measurable.
I am working until I have a certain amount of mailbox money, then I am out of the working game. My goal is to make as much money as soon as possible to give myself that freedom.
I'll still work but in things that don't require me to make a certain amount to support my life, wife and kids.
Bands are:
50-80
80-120
120-200
200-350
450-550
550-1.25 (Rumors of north of 1.25, I saw one guy make 1.5 one year and his margin dollars was over 100M)
what kind of medicine do you practice?
Curious if your net worth is above or below the rule of thumb of (assuming early-mid 50s), 5-6x salary, so $7.5m-$9m.ThrowAwayAccount1973 said:
Don't want to use my reg account b/c people will think I am making things up, bragging, get their feelings hurt.
Doc x 20 yrs in practice
Yr 1 -400K working 32 hrs/wk
Yr 15 - 600K working 32hrs/wk
Yr 18-20 - 1.5M working 18hrs/wk. I could make 2M if I wanted to work a 40 hr wk. If I stopped working completely would make 1M/yr. I own my practice with other docs working for me.
Rental net income past 5 yrs between 1-300K. But I typically put the $$$ back to improve the homes or buy new homes so doesn't contribute to cash flow. Other RE investment pulls in 100K/yr that I put back to expand this niche.
No one will be jealous of my stats so I'll post as me.
I'm a specialist in a lab at A&M, with a BS in my industry and between 5 and 10 years related experience depending on who you ask. I manage between 3 and 8 student workers depending on the season, a couple grad students, and 5 or 6 independent projects in this lab.
I make 45k a year. My understanding is that we are a relatively low funded lab so there wasn't any room in the budget to offer more. I've had student workers graduate out of this lab making 60k to start, and I'm hoping before long my efforts to gain meaningful experience and networking will pay off.
I'm a specialist in a lab at A&M, with a BS in my industry and between 5 and 10 years related experience depending on who you ask. I manage between 3 and 8 student workers depending on the season, a couple grad students, and 5 or 6 independent projects in this lab.
I make 45k a year. My understanding is that we are a relatively low funded lab so there wasn't any room in the budget to offer more. I've had student workers graduate out of this lab making 60k to start, and I'm hoping before long my efforts to gain meaningful experience and networking will pay off.
I don't think that rule of thumb means a whole bunch when you have a business spitting off $1M/year.62strat said:Curious if your net worth is above or below the rule of thumb of (assuming early-mid 50s), 5-6x salary, so $7.5m-$9m.ThrowAwayAccount1973 said:
Don't want to use my reg account b/c people will think I am making things up, bragging, get their feelings hurt.
Doc x 20 yrs in practice
Yr 1 -400K working 32 hrs/wk
Yr 15 - 600K working 32hrs/wk
Yr 18-20 - 1.5M working 18hrs/wk. I could make 2M if I wanted to work a 40 hr wk. If I stopped working completely would make 1M/yr. I own my practice with other docs working for me.
Rental net income past 5 yrs between 1-300K. But I typically put the $$$ back to improve the homes or buy new homes so doesn't contribute to cash flow. Other RE investment pulls in 100K/yr that I put back to expand this niche.
Even at zero savings, He could likely sell that practice to PE today for a nice multiple and live off that.
I made a $baziiion from 2017 to 2019, but I can't tell you how.
It's one of those "if I told you, I would have to kill you" scenarios.
Lets just say the company I own did a large systems implementation for a large integrated oil and gas company.
That concludes my "look at me" post.
It's one of those "if I told you, I would have to kill you" scenarios.
Lets just say the company I own did a large systems implementation for a large integrated oil and gas company.
That concludes my "look at me" post.
Ya but QBI deduction vs. Self Employment Tax vs. Payroll Taxes.fka ftc said:
If your business is setup to be a disregarded entity, then there is usually no difference between salary vs distribution. You pay tax on the net income of the company, and your salary is not a deductible expense.
If you are not setup with the company as a disregarded entity, then you are likely paying taxes on some of the money twice. Whether that option is better than the first is a question for the accountants.
Just pointing out that the tax man is going to get you one way or another.
There is optimization to be done (especially with QBI if you have assets and payroll that would limit it).
without posting specific numbers, now that most job postings require salary range info included I'm surprised to see how low mid level mgmt are paid. Specifically in my industry med device the postings I'm seeing for engineering manager/Sr Mgr at large companies mostly all have ranges of which mine falls near the median as just a Staff level engineer at a small startup, and having worked at a few before suspect my bonus % is likely at least double what they're offering, plus a sizeable qty of equity hopefully valued 6-figures+ within a few years or sooner upon an acquisition.
just interesting to know I may be out-earning my previous managers just by going to a smaller company
just interesting to know I may be out-earning my previous managers just by going to a smaller company
Lol, I'm not doxing myself, Mr IRS Agent
I coerce people into raised expectations, and because I'm very good at it the market rewards me handsomely
I coerce people into raised expectations, and because I'm very good at it the market rewards me handsomely
Diggity said:
what kind of medicine do you practice?
I am office based and group makes about 6M+ profit a yr. We have a bunch of partners with varying degree of ownership.
Current net worth about 8-9M. But onlly made 1.5M past 3 yrs. Right before owning the medical practice, I would guess net worth about 4-5M62strat said:Curious if your net worth is above or below the rule of thumb of (assuming early-mid 50s), 5-6x salary, so $7.5m-$9m.ThrowAwayAccount1973 said:
Don't want to use my reg account b/c people will think I am making things up, bragging, get their feelings hurt.
Doc x 20 yrs in practice
Yr 1 -400K working 32 hrs/wk
Yr 15 - 600K working 32hrs/wk
Yr 18-20 - 1.5M working 18hrs/wk. I could make 2M if I wanted to work a 40 hr wk. If I stopped working completely would make 1M/yr. I own my practice with other docs working for me.
Rental net income past 5 yrs between 1-300K. But I typically put the $$$ back to improve the homes or buy new homes so doesn't contribute to cash flow. Other RE investment pulls in 100K/yr that I put back to expand this niche.
If practice continues to make 1.5M/yr, I would think my net worth will be 20M in about 5 yrs. If I sold my share of the practice, its probably worth 2-3M.
AggieBucksJB
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