If I’m a Board Member or Shareholder, How Do I Pay Myself from My Business?
When you want to assign a salary, you only need to make one or two transfers from your company bank account to your bank account (in your name) in a specific format.
There is good news for you if you currently have a 20/80 distribution where part of your salary is considered a board member payment. The salaries will be merged, and you won’t have to pay taxes separately for the board member portion anymore.
There are options available to you:
- You can be recognized as an employee in your country of residence. However, it’s important to keep in mind that taxes will be deducted from your salary there. While this may seem complex, if you are a tax resident of a country supported by Companio Work, the process becomes effortless.
- Alternatively, you have the option to work as a freelancer in your country of residence and issue invoices to your company. For instance, if you are a tax resident of Spain, Companio One Spain can provide assistance in this regard.
- If you do not have tax residency in any jurisdiction and are willing to assume responsibility for potential non-compliance with tax obligations, you have the option to invoice your company as a contractor. However, it is strongly advised to consult with a local tax advisor beforehand.
How to make the payment?
You only need to make one or two transfers from your business account to your account every month you want to pay yourself a salary.
On the other hand, you have to create a contract as an employee or freelancer, depending on the case. These contracts must indicate the following:
- That the company hires you as an employee or a freelancer.
- The job description (e.g., online marketing expert).
- Other details such as salary, working hours, schedules, etc.
With Companio, you can automatically generate these contracts in a few clicks.
👉🏻 Let’s see an example:
Erick is the CEO of a three-member startup. He has been living in Estonia for the past 2 years, so he is considered a tax resident there. Consequently, he chooses an employee salary of €1000.
To pay his salary, the company makes a transfer of €1000 from the company’s corporate account in Wise to Erick’s bank account with the definition of “online marketing expert salary.”
Erick will always receive the same salary, so he uses Companio to generate a simple contract for himself with this amount.
If you have questions about the taxes paid on salaries to employees and contractors, read this article.
You can contact our support team here if you don’t know how to complete these contracts or have any other questions.