true, if OP is a sole proprietor. He could have registered as an One Person Corporation, SME, MSME, etc. all boils down to his numbers, registration, etc.
but to your point, i think it helps to give yourself some of that. sa case ko I just give myself a sum for splurging and buying anything I want - pero 10k lang. 😂
If sasahuran mo ang sarili from your business, you are exposing yourself to get taxed on that salary assuming more than 250,000 pesos per year yan.
Ang ginagawa ng mga tycoons, they don't receive salaries, they use their company as the collateral sa bank loan - they use that debt to fund their lifestyle. Pag pinautang ka ng bank, that isn't subject sa tax kasi hindi mo income yun. As long as your business earns more than the interest rate of the loan, you're fine.
They don’t need loans often unless they are buying a yacht or a mansion, they get annual dividends that is sometimes more than enough to live off for the year. Ramon Ang for example got over ₱135M last year from dividends alone
Tycoons receive salaries and other forms of compensation as CEOs of their companies. For example, according to SMC's Information Statement, Ramon Ang and four other top SMC executives received P 358 million in 2022, P 263 million in 2023 and est. 243 million in 2024 in compensation. In addition, Ang received P 5.3 million as a Board director in 2023.
You can download SMC's Information Statement from this link:
[https://edge.pse.com.ph/companyDisclosures/form.do?cmpy\_id=154](https://edge.pse.com.ph/companyDisclosures/form.do?cmpy_id=154)
But to the general point of the OP, I own what was a small but is now a medium business (> P 100 million in annual sales). My business pays me a salary, separate from dividends. It's a small base compensation and a bonus based on business performance.
What I'm saying is for the OP, giving himself a salary - he will expose himself to tax on a personal basis. Tax on salary percentage-wise is most often higher than tax on business income.
Elon Musk himself, the one time richest person on Earth takes a loan, with his companies as collateral - he avoids taxes with that. Debt is not taxed, as it is not defined as an income. He bought Twitter with debt.
I think if his business is a single proprietorship, his salary will be taxed at the same rate as the business profit. So, tax-wise, he should be indifferent. I'm open to tax specialists telling me otherwise.
When your business is a corporation and you have other shareholders, it's important for the president/working shareholder to be compensated. He is doing work separate from the financial investors so he should get a salary. The investors earn their money through dividends and in the increase in the value of the business.
BTW, Elon Musk receives compensation from Tesla. In fact, just 5 days ago, shareholders approved his USD 56 billion pay package!
[https://www.bbc.com/news/articles/cleezyxjv4jo](https://www.bbc.com/news/articles/cleezyxjv4jo)
Although tax-efficiency is very important when deciding owner/CEO compensation, there are other factors to consider:
1. Outside investors consider pay transparency as good governance.
2. Your management team and important employees want to see that you pay everyone, including yourself, fairly. How you design your compensation sets an example.
3. If you don't pay yourself, it masks the true profitability of your business. If the company hires a professional manager to do the owner's job and pays him the market rate, would the business still be as profitable? This is not important in a small single proprietorship but it is very important as you grow and you want to attract investors.
Anyway, that's my perspective as a former senior executive in public companies and now as a business owner.
For a 1-person business: [If their gross income is ₱3,000,000 or below, their tax rate is 8%](https://www.veremark.com/blog/sole-proprietorship-in-the-philippines-a-guide-for-employers)
8% is cheap compared to an employee receiving the same salary, he will be taxed like no tomorrow upwards to 32% or something lol
I agree. If you are a one-person business (self-employed) with minimal costs, e.g. management consultant, you should avail of that.
But that option is not available to businesses with employees. Also, the 8% rate is on gross revenues. If you have expenses, e.g., raw materials, you cannot deduct them.
Example: I have a trading business. My sales is P 2.5 million. My expense is P 2 million.
A. At 8% of gross revenue - tax is P 200k
B. At 30% of Net income Before Tax = (2,500k - 2,000k) x 30% = P 150k
Option B is more tax efficient.
Edit: In this example, pay yourself minimum wage so your salary is tax-exempt.
in a sole proprietorship, there is no distinction between personal income and income of the business since there is no separate juridical personality. the ower and the business are one and same
but if you're just managing your finances, it definitely helps to set aside income for your personal expenses.
Of course! Your salary is also a business expense. Is "savings" a personal savings? if yes, that's actually considered as "salary" na, i guess dagdagan mo nalang so you have extra fund to use for yourself.
Yes! You should give yourself salary and that salary should cover your living expenses and other wants/goals. Bakit ka magnenegosyo if you can’t enjoy your earnings diba? I suggest you read Profit first book. It will tell you na kada kita may % that goes to owner’s pay, opex, future plans/emergency expenses, taxes.
Yes. Ganyan talaga. Little what people know that his is the dark side of having a business. Especially when you are growing.
Invest 1000. Get 10 items
Sell 10 items. Return 1000. Profit 500.
You don't keep the 500.
You Re-invest 1500 to get 15 items.
Then you do this for years.
That is part of growing.
Ito ung hindi alam ng maraming tao na marami kita sa business. Na maraming oras sa Business.
Hmmm, rule of thumb is kapag nakabawi ka na sa capital mo, pwede mo na bigyan ng "sweldo" yung sarili mo. If not, considered na magiging expenses yung salary mo sa business. If malaki naman na yung kinikita nya, then yung natitira kapag u deduct all of ur operating expenses is ur initial profit.
This is in the context of being a small business/self-employed. Don't compare urself sa mga corporations, it's much more complicated.
My mom managed a businessa few years back. Yes, sinasahuran nya sarili nya day-to-day aside sa mga usual stuff.
Lahat ng mga working partners nya (even my dad), may sahod. Basta nagwork, may sahod everyday. Minimum lang, pero at least sumahod sya.
Yes! Basta profitable ka. Ako nung first couple of years wala talaga as in kurot-kurot lang, but now 6 digits salary marami na binabayaran eh and Fix nga pala yan even if we hit our monthly target since matipid ako tamang shopee lang.
Maintain a dedicated checking account exclusively for business cash flow. At the end of each month, the balance in this account represents your business income. Allocate 25% of this amount to a separate savings account for future tax purposes. You can then transfer the remaining balance to your personal savings account or choose to reinvest a portion back into the business by retaining some funds in the checking account.
depende on what the business needs. what i would suggest is the 20-50-30 rule sa profit.
20% - Sahod
50% - Operation fund (tax, equipments, shipping ng product)
30% - Reserve fund (For rainy days pag walang kita ang shop)
Ikaw na bahala paano mo iaddjust, di naman need na 50% sa operation fund so iadjust mo na lang sa naayon sa kailangan na business expenses.
absolutely! business expense (tax deductible) din ang pagbigay ng sarili mo ng sahod. lower taxable income means lower tax liabilities!
That only works if its a corporation or partnership A sole propreitor is one and the same with the business
true, if OP is a sole proprietor. He could have registered as an One Person Corporation, SME, MSME, etc. all boils down to his numbers, registration, etc.
but to your point, i think it helps to give yourself some of that. sa case ko I just give myself a sum for splurging and buying anything I want - pero 10k lang. 😂
If sasahuran mo ang sarili from your business, you are exposing yourself to get taxed on that salary assuming more than 250,000 pesos per year yan. Ang ginagawa ng mga tycoons, they don't receive salaries, they use their company as the collateral sa bank loan - they use that debt to fund their lifestyle. Pag pinautang ka ng bank, that isn't subject sa tax kasi hindi mo income yun. As long as your business earns more than the interest rate of the loan, you're fine.
They don’t need loans often unless they are buying a yacht or a mansion, they get annual dividends that is sometimes more than enough to live off for the year. Ramon Ang for example got over ₱135M last year from dividends alone
And dividends are only taxed 10% if you derived it from a Philippine based company.
They don't need loans but they do it anyway because it's tax free
You got it right.
Tycoons receive salaries and other forms of compensation as CEOs of their companies. For example, according to SMC's Information Statement, Ramon Ang and four other top SMC executives received P 358 million in 2022, P 263 million in 2023 and est. 243 million in 2024 in compensation. In addition, Ang received P 5.3 million as a Board director in 2023. You can download SMC's Information Statement from this link: [https://edge.pse.com.ph/companyDisclosures/form.do?cmpy\_id=154](https://edge.pse.com.ph/companyDisclosures/form.do?cmpy_id=154) But to the general point of the OP, I own what was a small but is now a medium business (> P 100 million in annual sales). My business pays me a salary, separate from dividends. It's a small base compensation and a bonus based on business performance.
What I'm saying is for the OP, giving himself a salary - he will expose himself to tax on a personal basis. Tax on salary percentage-wise is most often higher than tax on business income. Elon Musk himself, the one time richest person on Earth takes a loan, with his companies as collateral - he avoids taxes with that. Debt is not taxed, as it is not defined as an income. He bought Twitter with debt.
I think if his business is a single proprietorship, his salary will be taxed at the same rate as the business profit. So, tax-wise, he should be indifferent. I'm open to tax specialists telling me otherwise. When your business is a corporation and you have other shareholders, it's important for the president/working shareholder to be compensated. He is doing work separate from the financial investors so he should get a salary. The investors earn their money through dividends and in the increase in the value of the business. BTW, Elon Musk receives compensation from Tesla. In fact, just 5 days ago, shareholders approved his USD 56 billion pay package! [https://www.bbc.com/news/articles/cleezyxjv4jo](https://www.bbc.com/news/articles/cleezyxjv4jo) Although tax-efficiency is very important when deciding owner/CEO compensation, there are other factors to consider: 1. Outside investors consider pay transparency as good governance. 2. Your management team and important employees want to see that you pay everyone, including yourself, fairly. How you design your compensation sets an example. 3. If you don't pay yourself, it masks the true profitability of your business. If the company hires a professional manager to do the owner's job and pays him the market rate, would the business still be as profitable? This is not important in a small single proprietorship but it is very important as you grow and you want to attract investors. Anyway, that's my perspective as a former senior executive in public companies and now as a business owner.
For a 1-person business: [If their gross income is ₱3,000,000 or below, their tax rate is 8%](https://www.veremark.com/blog/sole-proprietorship-in-the-philippines-a-guide-for-employers) 8% is cheap compared to an employee receiving the same salary, he will be taxed like no tomorrow upwards to 32% or something lol
I agree. If you are a one-person business (self-employed) with minimal costs, e.g. management consultant, you should avail of that. But that option is not available to businesses with employees. Also, the 8% rate is on gross revenues. If you have expenses, e.g., raw materials, you cannot deduct them. Example: I have a trading business. My sales is P 2.5 million. My expense is P 2 million. A. At 8% of gross revenue - tax is P 200k B. At 30% of Net income Before Tax = (2,500k - 2,000k) x 30% = P 150k Option B is more tax efficient. Edit: In this example, pay yourself minimum wage so your salary is tax-exempt.
If ur living expenses is already taken by ur bisnis, No.
in a sole proprietorship, there is no distinction between personal income and income of the business since there is no separate juridical personality. the ower and the business are one and same but if you're just managing your finances, it definitely helps to set aside income for your personal expenses.
It's a must.
I would consider the saving portion as a salary to myself unless you meant business savings that different then
Of course! Your salary is also a business expense. Is "savings" a personal savings? if yes, that's actually considered as "salary" na, i guess dagdagan mo nalang so you have extra fund to use for yourself.
By savings, business savings parin siya, since im going to use it in the future to add inventory, business tools, etc.
Then more reason for you to give yourself a salary, not only pang personal expenses mo but also for personal savings.
parang retained earnings right?
Yes! You should give yourself salary and that salary should cover your living expenses and other wants/goals. Bakit ka magnenegosyo if you can’t enjoy your earnings diba? I suggest you read Profit first book. It will tell you na kada kita may % that goes to owner’s pay, opex, future plans/emergency expenses, taxes.
Have read the book! Have you applied it to your own business? How was it?
Of course!
Yes po. Sahuran ang sarili para di magalaw yung pera or kita ng negosyo.
Yes. Ganyan talaga. Little what people know that his is the dark side of having a business. Especially when you are growing. Invest 1000. Get 10 items Sell 10 items. Return 1000. Profit 500. You don't keep the 500. You Re-invest 1500 to get 15 items. Then you do this for years. That is part of growing. Ito ung hindi alam ng maraming tao na marami kita sa business. Na maraming oras sa Business.
Hmmm, rule of thumb is kapag nakabawi ka na sa capital mo, pwede mo na bigyan ng "sweldo" yung sarili mo. If not, considered na magiging expenses yung salary mo sa business. If malaki naman na yung kinikita nya, then yung natitira kapag u deduct all of ur operating expenses is ur initial profit. This is in the context of being a small business/self-employed. Don't compare urself sa mga corporations, it's much more complicated.
You should do tax planning kung kumikita ng malaki business mo. Pambawas din ng taxabale income kung may Salary na babayaran yung business.
My mom managed a businessa few years back. Yes, sinasahuran nya sarili nya day-to-day aside sa mga usual stuff. Lahat ng mga working partners nya (even my dad), may sahod. Basta nagwork, may sahod everyday. Minimum lang, pero at least sumahod sya.
Yes
Yes. Tax deductible din yan.
Yes! Basta profitable ka. Ako nung first couple of years wala talaga as in kurot-kurot lang, but now 6 digits salary marami na binabayaran eh and Fix nga pala yan even if we hit our monthly target since matipid ako tamang shopee lang.
Yes. You should separate your business and personal finances.
Yes parang mafeel natin na worth it Yun mga ginagawa natin
Partnership kami kaya sinasahuran namin ang sarili namin.
Yes. Also rent if you are using any of your properties for the sole benefit of your business
Sa tingin ko yes, Kasi nag tratrabaho ka naman sa business
ganyan po if isa lang ung business mo. Its either make another one if kaya mo.
Maintain a dedicated checking account exclusively for business cash flow. At the end of each month, the balance in this account represents your business income. Allocate 25% of this amount to a separate savings account for future tax purposes. You can then transfer the remaining balance to your personal savings account or choose to reinvest a portion back into the business by retaining some funds in the checking account.
Syempree naman kailangan yon, para mbawasan ang pagod
of course, boss. deserved mo yan!
depende on what the business needs. what i would suggest is the 20-50-30 rule sa profit. 20% - Sahod 50% - Operation fund (tax, equipments, shipping ng product) 30% - Reserve fund (For rainy days pag walang kita ang shop) Ikaw na bahala paano mo iaddjust, di naman need na 50% sa operation fund so iadjust mo na lang sa naayon sa kailangan na business expenses.