Question
We are a group of four co-founders, all with an IT/Engineering background. Here is a probably very basic question regarding the start of our company, which we thought is probably important to get right from the beginning: If we form a company, do we have to (or should we) pay ourselves a salary if we are the co-founders, or can we just use the running profits of the company to cover all expenses? Is this a tax issue?
Answers: 1 public & 0 private
Assuming this is about a US company, this is a bit like that famous "rule #1 there are no rules, rule #2 in case of doubt read rule #1".
You don't HAVE to do anything.
Who is funding this? If you are beginning with FFF (Friends, Family & Fools), i.e. pre-funding, it's tough to justify, but hey, they ARE your FFFs. If you have a seed round from Angels (say 300K to 500K), then some pay should be warranted. But REMEMBER, you gave up equity for this $$$, so are you buying a $250K 2006 Camry? (Famous quote from NEXT engineer who used part of his equity to buy a $5,000 used car. Later on after splits, the $5K was worth $250K).
Even if you each get paid $5K, that's $20K a month run rate!!!
Overall, I'm more concerned you don't have a community source (nothing wrong with the Internet, but...) to ask questions like these. Get one, an in-person group, for the other questions you are going to have will be more embarrassing. Best of luck.
Luis
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