Here’s something that made me want to hit my head against the wall a couple times. Suppose you create a startup that is mostly owned by you (some other fraction is owned by friends, angel investors,etc). The company pays you a reasonable salary.
Now comes the dumb part: who is going to be on the board of directors? Since you own most of the company, you should obviously be on the board, right? Well, think again. The danger is that due to recent court decisions, a tax inspector may decide that your role as director absorbs your role as an employee, and thus your entire compensation should be taxed at a flat 42%.
So if you are just starting out and you don’t want to pay yourself very much, you end up being punished by a very high marginal rate.
The only sure way around this is to appoint a trusted friend to the board of directors instead and have them make the decisions on your behalf.
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