It really depends on how the business entity is set up. The line between what your salary is and what the business makes blurs. There are tax law implications,

It really depends on how the business entity is set up. The line between what your salary is and what the business makes blurs. There are tax law implications, but it's less about tax avoidance and more about not screwing yourself. Depending on the business structure, one reason I know for setting a salary is because you're forced to. Certain taxes in the US (FICA) are based off of your income. They don't want you to set a salary of $1, for example, and then pay yourself via dividends to avoid taxes. The IRS states it has to be 'reasonable.'