newtofl wrote:Hi
i am starting a one man private limited (aka i am 100% shareholder and director - same person). i am a consultant, and will not have a physical address office (since i will be at my client site most of the time)
i am puzzled over shareholder vs directorship fees. i was told i can pay myself minimal (salary every month) , then have everything credited as shareholder fees (and not director fees) - since shareholder fees is not taxable ?
2nd , since my operating model is very simple (client pays me a flat rate every month , and i dont pay office rent, this is a OMS model, and i dont have any more coy expanses) -> is secreterial services really needed ? do i need help in filing those ACRA , IRAS, payslip stuff etc ?
Yes, that is exactly right. I set a base salary for myself that ensured CPF contributions were max'ed out. I paid directors fees when I made a lot of money. In my case, as a US citizen, dividends paid would have been taxable in the USA at a much higher rate than earned income, and thus I never took that route.newtofl wrote:hi Strong Eagle,
thanks for the clarifications. So am i right to say that i can actually split my total revenue in such a way whereby i 1) monthly decent pay -> CPF and income tax , 2) director fees -> only income tax and 3) shareholder profits -> no income tax and no CPF ?
Correct.newtofl wrote:oh, and it the above is possible - i will assume my tax rate will be at (1) + (2) = the amount i get from my salary and director's fees , just that i only need to compute CPF contribution from my monthly salary (item 1) ?
You've asked a complex question. First, what do you mean by 50/50 share? Are you proposing that each of you hold 50 percent of the shares and thus, are each entitled to 50 percent of the dividends? By law, dividends must be uniformly distributed on the basis of a per share dividend and the number of shares held. Is this your intention?newtofl wrote:ah yes , thank you very much for the answers. getting clearer now.
Some other questions - i am considering getting a partner (50/50 share , and as a director). i was told that if one was to get a monthly salary , he/she needs a formal letter of employment from the company ?
his role will be more passive in nature , acting as an advisor. so my take is that i issue myself a letter of employment (to get the monthly salary -> CPF and income tax) , then we will split whatever that remains as director fees (income tax) and shareholder dividend (no tax , no cpf) . He has no monthly salary (and no letter of employment) as he is an advisor.
is the above possible ?
in that case , i am thinking ofIt sounds like your partner wants to supply advice, then participate in the profits instead of drawing a salary. In this case you would want to draw up an employment contract specifying how profits are computed and split. if your partner wants part of the profits as dividends, then make sure she has less than 50 percent of the stock so you retain control.
Unless you have two different classes of stock, then a 55/45 allocation of stock means that dividends dividends must also be split 55/45. Example. You have 1000 shares of stock. You own 550, partner owns 450. You have $1000 in profit and declare a dividend of $1 per share. You get $550 in dividends, partner gets $450. This is a matter of law. You cannot change this.newtofl wrote:whoa.... i didnt know it will get so complicated. Really appreciate the advise Giant Eagle. You hit the nail on the head , for the last para
in that case , i am thinking ofIt sounds like your partner wants to supply advice, then participate in the profits instead of drawing a salary. In this case you would want to draw up an employment contract specifying how profits are computed and split. if your partner wants part of the profits as dividends, then make sure she has less than 50 percent of the stock so you retain control.
a) 55/45 in my favor , then have a legal contract between us saying how the shareholder dividend are split.
Again, I have no idea why you want your partner to be a director because she will have equal powers with you under the law. In other words, by making your partner a director, she will have as much management authority and responsibility as you, and if she decides she doesn't like what you are doing, and blocks it, your only recourse is the courts. You could get a pre-signed, undated letter of resignation but this also might have issues.b) draft at an AGM, how much director fees should be allocated to each one of us (and then of course the remainder will be the shareholder divided in 55/45 as per item a)
You will want an employment contract stating ALL of your remuneration... monthly salary and directors fees (and how calculated), expense reimbursement, etc.c) i will get a letter of employment indicating my monthly salary , while he gets nothing -> just item b and a above
-> does the above make more sense ?
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