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Thread: Determining owners salary

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    Silver Member league_of_ordinary_men's Avatar
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    Determining owners salary

    Hi everyone,okay can someone please explain to me how this works.Okay if you have a privet company and your the director of the business,how do you show of the monthly pay slip or pay roll system how much you as the director/owner earn a month? By that I mean do you have to show an hourly rate or can you just show the total earnings which you determined after deducting all the necessary deductions? And should you as the owner also receive dividends apart from your salary as the director or is it the same thing?

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    Site Caretaker Dave A's Avatar
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    You would draw up the payslip just the same as any other employee, except the gross pay line is directors emoluments rather than salary.

    If the remuneration is "part time', things can get interesting on the PAYE calculation front though.

    Dividends are dealt with totally separately and are not included in remuneration.
    The trouble with opportunity is it normally comes dressed up as work.

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    Diamond Member Justloadit's Avatar
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    I suggest you have a fixed salary on a monthly basis, which creates a payslip, PAYE and UIF, which is useful do get accounts, credit cards, loans, and other services which request a pay slip.
    Then every 6 months or yearly, or when ever you choose, you make the dividends transfer to your personal account, ensuring you have a record of the values. Choosing 6 months maybe better, as this can coincide with your provisional tax payment.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Silver Member league_of_ordinary_men's Avatar
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    Quote Originally Posted by Justloadit View Post
    I suggest you have a fixed salary on a monthly basis, which creates a payslip, PAYE and UIF, which is useful do get accounts, credit cards, loans, and other services which request a pay slip.
    Then every 6 months or yearly, or when ever you choose, you make the dividends transfer to your personal account, ensuring you have a record of the values. Choosing 6 months maybe better, as this can coincide with your provisional tax payment.
    Great advise both of you thank you.

    @Justloadit,can I transfer the dividends ever month?And why is it better to coincide with my provisional tax payment?

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    Diamond Member Justloadit's Avatar
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    You can transfer dividends when ever you like, as long as it does not compromise the operations of the company, or company capital for it's daily operations.
    What a payslip creates, is a regular monthly figure both for earnings and PAYE payments.

    The coincidence with the provisional payment, is simply easier at that time to insert the amounts transferred as dividends to your provisional tax form, calculate the amount of PAYE paid, and calculate the extra tax required, and create the payment from the dividends received for the income tax. If you already have it in your account then payment would be forthwith.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Silver Member league_of_ordinary_men's Avatar
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    Quote Originally Posted by Justloadit View Post
    You can transfer dividends when ever you like, as long as it does not compromise the operations of the company, or company capital for it's daily operations.
    What a payslip creates, is a regular monthly figure both for earnings and PAYE payments.

    The coincidence with the provisional payment, is simply easier at that time to insert the amounts transferred as dividends to your provisional tax form, calculate the amount of PAYE paid, and calculate the extra tax required, and create the payment from the dividends received for the income tax. If you already have it in your account then payment would be forthwith.
    Thank you this a a major help,what tax or other payments will be due on dividends? You now like on a salary you pay UIF,PAYE...etc.

    And this is the kind of information we need to put in one post and make a sticky saying "A beginners guide to business".

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    The company is responsible for the withholding tax on dividends, and needs to pay it within 30 days of paying the net dividend to the shareholder. The dividend received will therefore not affect your taxable income and you should excluded it from Taxable Income on your provisional tax return.

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    Diamond Member Justloadit's Avatar
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    You will need to look at the tax tables, as the amount of tax paid, is directly proportional to the total amount earned/received for the year.
    Just remember that the dividends from a small company, may not follow the rules of corporates. eg. Corporates pay tax on the profits, and then disperse dividends to it's share holders, whilst a typical small company, the company makes a profit, but the owner takes the profit out of the company as an expense - wages/expenses, so effectively the small company never makes a profit, as the owner takes it all out, however the owner now pays tax on the money taken, deemed as remuneration, and not as a dividend.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Bronze Member Miro Bagrov's Avatar
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    Salaries bear the PAYE tax.

    Profits bear companies tax and VAT.

    Buying capital equipment on the business name is a depreciateable expense. Business property expenses are deductible.


    Ideally you would find a way of paying the least amount of tax in combination of these three. I can't say more without numbers or working closely but the idea is earn more, pay less tax..

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Justloadit View Post
    Just remember that the dividends from a small company, may not follow the rules of corporates. eg. Corporates pay tax on the profits, and then disperse dividends to it's share holders, whilst a typical small company, the company makes a profit, but the owner takes the profit out of the company as an expense - wages/expenses, so effectively the small company never makes a profit, as the owner takes it all out, however the owner now pays tax on the money taken, deemed as remuneration, and not as a dividend.
    I've been trying to work out why this post troubles me so much. It's not that the points are wrong necessarily - I'd certainly agree that owners are paid out of profits and you can certainly draw money on as regular a basis as you wish and the company can afford.



    Perhaps it's that it must be pretty rare that an owner can actually draw all the profits out of a private company as an expense. And of course, if it's a qualifying SBC, that may not even be advisable.

    Or maybe I'm in the wrong business
    The trouble with opportunity is it normally comes dressed up as work.

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