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Lookingatself-employmentincomeisnotthesameaslookingatapaycheck.COMPUTINGYOURYEARLYFINANCIALTAKESALARYDETERMINERSSALARYVSNON-SALARYCreativebusinessesaremorevolatilethanmostothers.Clientscomeandgoandtheirbudgetsriseandfall.Soonlyaseveralyearaverageofcompensationisevenworthconsidering.Thisshouldntbeanissuebutitoftenis.Thosenotdependentontheincomefromtheirbusi-nessesexpectlessthanthosewhoare.Thiscanbecomeaself-fulllingprophesybecausetheyarewillingtoacceptlesstheyendupmakinglessandtheirincomeskewstheaverage.Herewellonlyconsiderguidelinesforprincipalsofestablishedseriousbusinesses.Startbywritingdownyourbefore-taxsalarythetotalofwhatyouvepaidyourselfonaregularbasisthroughouttheyear.Thenaddtoitanynon-salaryincomeyouvealsoreceivedoccasionaldisburse-mentsbonusesandprot.Nowenteranestimatedamountforthetax-deductiblepersonalperkswriteoffsthatyouvebenetedfromasarmprincipal.Donotincludecom-panybenetssuchashealthinsurancethatemployeesalsoreceive.Perksincludethoseactivitiesanditemsthatarelargelyper-sonalinnaturebutareclaimedastax-deductiblebusinessexpenses.Forinstanceocca-sionalpersonalmealstravelentertainingrecreationandpur-chaseditems.Althoughpay-mentofpersonalexpenseswithcompanyfundsisillegalandcanresultinpenaltiesitisdoubtfultheresaself-employedpersonIndividualsworkingalonewhosimplytakecashoutofthermasneededhavemoreofahobbythanaseriousbusinessprincipalsofmulti-personrmswhodoitarebadnancialman-agers.Thisishowprincipalsshouldbecom-pensatedforwhomtheyarewhattheyhaveinvestedandthesuccessofwhattheyown.Howmuchorlittleworktheydohavenoeffectonnon-salaryincome.Mostnon-salaryincomecomesfromarmsprotorwhatsleftoverafterallbusinessexpensesincludingprincipalssalarieshavebeenpaid.HowmuchprotispaidoutversusretainedCcorporationsandtowhomandwhenitisdistrib-utedanyorganizationisattheownersdiscretion.AlsoseeDistributiononpage3.Inadditionthereisthelong-termpossibilityofequityincomethesaleofthermsomeofitsassetse.g.realestateoraprincipalsshareofthem.Unfortunatelyformostprinci-palsthisismoreofadreamthanarealityasmostsmalltomid-sizecreativermshavelittleornosaleableequity.Onlywhenprincipalsarepaidreasonablesalariescannon-salarybedeterminedandprinci-palsrewardedfortheirowner-ship.SowhatsreasonableAprincipalssalaryshouldbecommensuratewithherorhisdailycontribu-tionsanddegreeofresponsibili-ty.Alsocomparabletowhatwouldbemadeifworkingelse-whereandwhatthermwouldhavetopayifitweretohireareplacement.BasedonthesefactorsinmetropolitanareasoftheUnitedStatesthiswouldmeanfrom65000to85000foranindi-vidualworkingalone.Forprinci-palsoftwo-personrmswhetherotherprincipalsoremployeestherangewouldbe2CreativeBusinessMarchApril2008whohasntoccasionallytrans-gressed.Addupallthesepersonalbusinessexpensesandmulti-plythetotalby0.40aroughapproximationoftheafter-taxsavingsyourebenetingfrom.Examplethecostofahundreddollardinnerthatsjustiedasabusinessexpenseprobablycostsyouinformofyourrmsdecreasedearningsonlysixtydollarswhichistheequivalentofgettingaforty-dollarsalaryincrease.Theresultingguremoneyreceivedplusmoneysavedisanapproximationofyourannu-alnancialreward.Notethatweveconsideredsalaryandnon-salaryincomeseparately.WhynotjustlumpeverythingtogetherBecausedoingsomakesitdifculttotrackhowwellarmoritsprincipalsisdoingatanygiventime.Alsodependingonthermslegalstructureitcouldhavetaximplications.Whateverarmssizewhenitcomestopayitshouldtreatprincipalsasemployees.Thatistheyshouldbepaidregularsalariesbasedontheircontributionsnotwhotheyare.Thatprincipalsberequiredtoearntheirkeepisespeciallyimportantinrmswithmorethanone.Whenprincipalsreceiveamarket-ratepaycheckarmstrueexpensescanbeaccuratelydeterminedandallocated.Areg-ularsalaryalsohelpsanindivid-uallivewithinhisorhermeans.Anditistheonlyfairwaythatmultipleprincipalscanberewardedaccordingtotheirindi-vidualeffort.HowconsistentHowimportantNon-salaryincome.Marketrate.Salaryincome.