Case Study #1
This successful IT small business company has two owners. Each owner needs to be reimbursed for costs they incur in performing management duties for the jointly owned small business company. But the costs they incur are not equal. The owners wish to have the company pay an equal amount to each owner.
This is a common situation where companies with more than one owner need to structure payments that are both fair to the small business company and reflect individual owners’ priorities.
How The situation of Small Business was improved:
The owners receive salary from the small business company that reflects the work they do servicing clients. Each owner also owns their own sister small business company. These sister companies provide management services to the main business. Each owner then uses the sister small business company to reimburse themselves for automobile costs and home office costs.
How the solution “Created Value for Small Business Accounting”:
Each owner has different priorities when it comes to the vehicles they wish to drive. One likes a low cost, fuel efficient vehicle and one likes an expensive, luxury vehicle. By keeping the costs to the operating small business company equal the owners feel each is being treated fairly. And by allowing each owner to choose the vehicle they drive they each get the vehicle they want to drive. Any funds left over after paying the owners of the small business accounting use of their vehicles can be paid out as additional compensation.By arranging payments structures to reflect the needs and priorities of the owners potential conflict is eliminated.
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*Names have been changed to maintain confidentiality.