Question: Jill Meier is the sole owner of Meier Corp., which provides her only source of income. Jill has always paid herself entirely by drawing dividends
Jill Meier is the sole owner of Meier Corp., which provides her only source of income. Jill has always paid herself entirely by drawing dividends from her corporation. A friend suggested that as long as she is earning about what she would have to pay someone else to run the business, she might be better off paying herself a salary instead of dividends because she would avoid the problem of double taxation. If Jill's company earns $220,000, all of which she will pay to herself, how much will she take home under each method? Assume a corporate tax rate of 33% and a personal tax rate of 22% on both salary and dividend income. Under dividends: $ ? Under salary: $ ?
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