Should I, as the founder of a company, have to draw a minimum wage?


I have started a company with 2 other co-founders in the US and own 40% of the company. I am the only employee on record as the CEO of the company. My lawyer insists that I should draw a minimum wage, even though we're no where close to making revenues, let alone profits. Essentially my salary will have to come out of the capital that we as the founders put up. I definitely don't want to do that.

Is it absolutely required? What did you do in your startups? Can it cause problems later?

Founder Salary

asked Dec 6 '12 at 03:47
6 points
  • How is your business structured (LLC, C Corp, S Corp, etc.)? – Zuly Gonzalez 5 years ago
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3 Answers


If your business is organized as a corporation, salary to officers is a hot issue for the IRS.

Also, it may be that since you're an employee, minimum wage laws are kicking in for you (in some states they don't kick in for employees-owners, in some they do. For some reason people on this site don't think that mentioning the relevant jurisdiction is important when they ask legal questions).

answered Dec 6 '12 at 05:02
5,090 points


When I talked to my CPA about that, the response was (California):

"Until you're making some substantial revenue (around $7K) - you don't have to set a salary for yourself. You can always explain it to the IRS."

answered Dec 6 '12 at 05:31
960 points


Drawing a salary to simply end up paying payroll taxes and depleting operating capital doesn't sound like an optimal solution. Until you have a revenue stream capable of generating enough cash to begin paying your salary or the other founding members, have you considered a arrangement between the 3 partners to determine a reasonable salary and defer the compensation until such time sales are sufficient to pay on those deferred commitments. Recording the deferral on your set-of-books might alleviate his concerns. Would that solve the lawyers concerns?

answered Dec 6 '12 at 04:57
Bob Z
1 point
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