I want to form a Pvt. Ltd. Company. How can I be paid by the Company?

VakilSearch is an online legal services provider for businesses and individuals. They get many questions from the founders and often, there's an overlap. Here, we focus on one of the most frequently asked questions...

Certainly, you, as the founder of the company, can be paid by the company. There are different ways in which you can be paid.If you decide to act as the employee of the company, then the manner in which you can be paid is a salary. Here you would, like any other employee, need to enter into an employment contract with the company, and receive remuneration. In addition to this remuneration, on the basis of this Employment Contract, and a specific clause for bonuses, you may be paid a bonus at either regular intervals or on the achievement of certain goals. For example, the bonus could be paid every quarter (3 months), Rs. 5000/-, or for every 10 happy customers a Rs. 1, 000/- bonus.

What may also be done is that you could be paid by way of consultancy fees. Consultancy fees are paid for your expertise in management and your time. So, if you are going to be managing the marketing efforts being made by your company for instance, you may derive your salary/remuneration in the form of this consultancy fee.

Shares are a good way of deriving remuneration in the form of dividends. This can happen by the Company giving you a certain amount of shares at regular intervals. For example, your Shareholders’ Agreement could state that you will get 0.2% of the shares of the Company every 2 months.

Dividends are the payments made to the shareholders of a company out of the profits made by the company. For example, if the total profit of your company in a particular year is Rs. 10, 00, 000/- and you want to distribute 10% of that as dividend, and you hold 49% of the shares of your company, then you would be entitled to get a Rs. 49,000/- as dividends

An uncommon way is through the payment of a commission. For example, the company sets a goal that on the completion of every 500 clients, Rs. 50, 000/- will be given to you as the founder. This could be a form of payment.

Thus, rejoice! There are many different ways in which you can be paid as the owner of the company.