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    Paying wife salary vs. drawing out equivalent amount
    My wife has started helping out with our family business that is a sole proprietorship. I am trying to figure the best way to pay her. As an employee she would get a regular check with withholding, disability, etc. I am trying to balance that with the option of just taking out the equivalent amount from cash flow.

    Seems like we come out ahead if she is employee since her salary would be a business deduction, but I am concerned that I might be missing something.

    Any input would be appreciated.

    Gary


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    It depends on your personal situation.

    If your income is stable enough then this seems to be a good route forward. However, I know several businesses here whose income is variable (very). In that scenario the partner (wife) simply invoices the business from time to time for 'work done'.

    That is certainly a business expense for the business, and the partner sets themselves up as a self-employed consultant (or whatever). It can introduce other complexities though.

    Of course there are other options, such as making the biz a partnership, etc.


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