Hey! Just raised a pre-seed, and now I need to start paying myself. Its a Delaware C Corp. Do I just go with Gusto and pay myself with a normal W2? Arent there any tax exemptions I can do? Whats the best practice?
The most important thing, get an accountant right away. Ask the accountant if they can/want to handle payroll for just the founders for now. Gusto is great but there is a cost, and sometimes it is more than the accountant just issuing payroll for you (when it is just say 2 founders or so). I had an accountant that did the founder payroll within their monthly fee for managing our books (up to 4 people actually). This made it cheaper and easier. Some banks also now offer this service for a small fee.
Yes many tax exemptions exist, get an accountant. A lot of founders I know have "lived" in their offices. Essentially they had the company rent a house to work from and they "lived" there eliminating their rent. This is technically taxable to the founders but can be creatively handled and deferred till you have some more money (at least to a certain degree).
Also, you didn't ask and probably know, but take the lowest amount in salary you can, minimum wage ideally. If you have more obligations then take more, but try to keep it to the lowest dollar amount possible. It is something your next round of investors will pay attention to.
Thank you! Its just payroll for myself for now, the other founder is in Europe and does payroll from the legal entity there. Gusto is $40 a month, which when u take 1 year its like 500$ almost, which I dislike. So is there any cheaper way to do it? I dont think I can afford an accountant at the moment, and we dont have any operations yet and likely wont have any revenues until late 2021 or early 2022, so I dont think an accountant would be a great idea.
I was thinking of doing that too with the rent, but a lot of comments online suggest the IRS doesnt rly like that.
Yes, I am only going to pay myself minimum wage so I can cover living costs. It should be about $2.5K here near NYC, might actually move somewhere cheaper say Florida or Austin or smth.
davismwfl|4 years ago
The most important thing, get an accountant right away. Ask the accountant if they can/want to handle payroll for just the founders for now. Gusto is great but there is a cost, and sometimes it is more than the accountant just issuing payroll for you (when it is just say 2 founders or so). I had an accountant that did the founder payroll within their monthly fee for managing our books (up to 4 people actually). This made it cheaper and easier. Some banks also now offer this service for a small fee.
Yes many tax exemptions exist, get an accountant. A lot of founders I know have "lived" in their offices. Essentially they had the company rent a house to work from and they "lived" there eliminating their rent. This is technically taxable to the founders but can be creatively handled and deferred till you have some more money (at least to a certain degree).
Also, you didn't ask and probably know, but take the lowest amount in salary you can, minimum wage ideally. If you have more obligations then take more, but try to keep it to the lowest dollar amount possible. It is something your next round of investors will pay attention to.
austinvsmiami|4 years ago
I was thinking of doing that too with the rent, but a lot of comments online suggest the IRS doesnt rly like that.
Yes, I am only going to pay myself minimum wage so I can cover living costs. It should be about $2.5K here near NYC, might actually move somewhere cheaper say Florida or Austin or smth.
verdverm|4 years ago
Talk to an accountant about taxes. In short, the company will have its own taxes and you will have yours.
Look into the 83b election to see if you can still do that, depends on when you got your shares originally
lsllc|4 years ago
austinvsmiami|4 years ago