One thing that's not mentioned, is the tax implications of each. In a cash-flow business you're going to wind up paying out ~45 - 50% in taxes on the income (e

One thing that's not mentioned, is the tax implications of each. In a cash-flow business you're going to wind up paying out ~45 - 50% in taxes on the income (especially if you live in CA!!!) In an equity business you wind up paying on capital gains, which if you hold your stock for more than 1 year can be as low as 15% (in the US, anyways). Once you do the math accross 3 - 5 years it often makes more sense to build an equity valuable company for sale. For cash-flow heavy businesses, a strategy to reduce tax and increase equity value can be to pay modest salaries and pump the bulk of the cash back into business expansion.