Advice: Can small-business owners cut their own salaries?

Dear Karen: Can I reduce my salary as a small-business owner?

Answer: Tax law requires business owners to pay themselves, but their salaries can be reduced or eliminated in a start-up or during a business downturn, said Frank Stokes of SPA Entrepreneur Consultants in Los Angeles. “If your current salary is a burden to the business, that’s a good reason to reduce your salary until revenue and profitability increase,” he said.

“Give yourself a regular paycheck. Each year, reset your monthly salary based on the month you earned the least during the previous year,” he said. Determine how much to save for taxes based on the highest-earning month in the previous year.

As your business recovers, resist the temptation to take too much salary, which can drain resources for business operations. Online guides such as salary.com/mysalary.asp can help determine ballpark salaries for your industry.

Paying for getting connected to investors

Dear Karen: What fee structure should our property investment company use to compensate people who introduce us to investors?

Answer: If these individuals are solely “finders” — people who make introductions but do not participate in vetting or negotiating the deal — a standard fee would be 2% to 5% of the total money raised, said Charles J. Curto, managing principal of Tech Coast Equity Group in Irvine.

You should talk to your attorney about this practice, however. In California, real estate laws may require such individuals to become licensed brokers, Curto said. And federal law may apply if you are deemed to be selling securities, an activity that is highly regulated. “You can invalidate the deal if you do the wrong thing,” he said.

Small-business questions? E-mail Karen at [email protected]