❌ Difference #6
Forgetting your Pay… or just doing it any Old Way
“I’m not paying myself anything at the moment; I’m reinvesting everything back into the business.”
“I need some cash this month, so I’m transferring some money to myself.”
🧮 These are decisions that seem trivial… but which can have serious consequences!
Forgetting your Pay... has Tax, Legal and Accounting Implications.
Why it matters
Business owners are often the last to pay themselves. This may be out of caution, or because they are unsure how to go about it.
And when they do pay themselves, it is sometimes without a clear framework: they transfer money to themselves without knowing whether it constitutes:
- a salary?
- a dividend?
- a reimbursement of expenses?
- a withdrawal from a current account?
Yet these distinctions have a direct impact on:
- 📜 the law (social security, HMRC, PAYE, legal regulations),
- 💶 taxation (income tax, social security contributions),
- 📘 accounting (and therefore the annual accounts, the profit/loss, cash flow).
💡 Forgetting about your remuneration is not normal
Even if you are ‘just starting out’ or ‘still in the growth phase’:
- You are working.
- You add value.
- You take on responsibility.
It is therefore legitimate to be paid for this, provided it is done correctly.
🧾 What options are available for paying yourself?
The method of remuneration depends on your company’s legal status and your own status as a director (self-employed, treated as an employee, minority director, etc.).
The main options:
Form | Status | Tax treatment | Social security contributions | Rate |
Management remuneration | Manager (limited liability company/single-member limited liability company) | Income tax (category: salaries and wages) | Yes (of self-employed scheme) | Monthly or quarterly |
Salary (chairperson of a single-member private limited company/single-member private limited company with simplified accounting) | Assimilated employee | Income tax (same as employee) | Yes (standard contributions) | Monthly (pay slip required) |
Dividends | Partner | Income tax (Flat tax 30%) | Sometimes social security contributions (depending on percentage of shares + status) | Once a year (after the AGM and allocation of profits) |
Reimbursement of expenses | All statuses | Not taxable (if justified) | No charge | Free, but compulsory monitoring |
Current account debit | Partner | Not taxable (if justified) | No charge | Free, but compulsory monitoring |
🔎 It is not the form of the bank transfer that determines the nature of the withdrawal.
It is the legal and accounting treatment you apply to it, in consultation with your accountant.
🚨 What you must not do: a partner’s current account in debit
When a director makes personal withdrawals in excess of what they are legitimately entitled to receive (salary, expenses, dividends), this creates a shareholder current account in debit.
In other words:
- Instead of the company owing money to its director, it is the director who becomes a debtor to the company.
- It is no longer the company that is being financed by its director, but the director who is being financed by the company.
⚠️ And this is strictly prohibited!
Because this amounts to treating the company as a bank, lending money to its director.
Yet banking is strictly regulated in France.
⚖️ And the penalties are no mere formality…
- It is not simply a tax penalty.
- It is not a corporation tax surcharge.
- It is a criminal offence: misuse of company assets, or even the illegal pursuit of banking activities.
👉 And this can lead to severe personal penalties (fines, disqualification from managing a business, or even imprisonment).
Our guideline
- Establish a clear framework tailored to your business and your legal status.
- Keep a precise record of all personal withdrawals: salaries, expenses, dividends, and reimbursements.
- Avoid any mindset of ‘helping yourself to the till’.
- And above all: never pay yourself more than you are entitled to.
💬 If in doubt, discuss it with your accountant before making the transfer. They are there to protect you – including from yourself.
The expert’s tip
- It’s normal to pay yourself. But it must be traceable and properly regulated.
- Any unjustified payment creates a major legal risk.
- A current account held by a partner as a debtor is prohibited: the company cannot provide you with funding.
- The authorities take this matter very seriously: the penalties are criminal, not just financial.
- The key is to plan ahead: the sooner you ask the question, the more likely you are to avoid unpleasant surprises.
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