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They run the company. If the business is cash flow positive, they can just set their salary to be whatever they want. Your VC will be very unhappy if you overt
by sbierwagen 4y ago
They run the company. If the business is cash flow positive, they can just set their salary to be whatever they want.
Your VC will be very unhappy if you overtly cash out, and you can be subject to a minority-shareholder lawsuit if you stop reinvesting and direct 100% of the profit into your own pockets, and it is tax-inefficient to direct most of your profit as salary instead of long-term capital gains (which in the US are taxed lower than regular income) but nothing stops a founder from making their salary be $1MM a year or whatever.
- GianFabien 4y agoWhich is basically what Adam Neumann did @WeWork after the SoftBank investment.
- HTTP418 4y agoAren't there states in USA with no income tax?
- sbierwagen 4y agoThere are US states with no state income tax, but the federal income tax still applies. LTCG ranges from 0 to 20%, but the 22% federal income tax bracket starts at $41,775 a year, depending on marital status. For any significant sum in the US, it's always going to be cheaper to book income as sales of stock held longer than a year than as ordinary income.