When
starters calculate finances, or salary, or profit, they might
literally forget about taxes. And I do not mean 'forgetting' in a
fraudulent way, they just don't take it into account. Depending on
where you are in the world, that might be a big mistake.
In a
previous post, "five common mistakes in your first business
plan," we mentioned that many starters forget to include a
salary for themselves. But you have to include the total picture:
salary and taxes.
A salary is a 100% deductible expense for a
business. But that salary is then taxed under the regime of personal
income tax.
In many Western European countries, the taxman walks
away with 50% of your income. So if you want 1'500€ of net monthly
salary, your company will need to make 3'000€ per month or 36'000€
per year, to cover that cost.
The global average for personal
income tax is close to 30%. So a 1'500$ monthly net salary will cost
the company 2'142$, or 25'714$ per year.
As a starter, you need to
know this information. And that is where your accountant comes in.
You ask him to do the math on your net-gross salary calculation.
Consider following/subscribing to this blog. It's free and it motivates me to sharpen my pencil. Thanks!
Top 10 about the author; Erik Victor
1. is a serial
entrepreneur and started his career in Engineering
2. currently a
majority shareholder in corporations in the fields of Industrial Real
Estate, Wealth Management & Investment funds, and International
Tax Planning
3. has a passion for the dynamics of young
businesses and actively endorses several start-ups
4. is an
engaged member of several think-tanks and an international conference
speaker
5. has a business footprint in six countries
6. speaks
five languages
7. personal life - resides in Europe
8. Erik
(48) is known as a discrete and private person, a family man
9.
loves to spend his limited holidays in the mountains or at sea on his
yacht
10. Erik has no social media accounts
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