I surveyed 500 startup founders about their salaries • Hacker News Board

Re: I surveyed 500 startup founders about their salaries

#81

Post by dcow » Mon, Oct 17, 2022, 6:46 PM UTC

paxys wrote: post #17

dcow wrote: post #4

I think what people often blissfully miss about founder comp is that the business literally supports the founder's entire life. Everything is a business expense. Pay yourself 50k as a little bonus and run almost everything through the business, because if you don't survive, neither does the business. You think founders are paying out of pocket for their fancy SF and NYC apartments at 50k per year living humbly? Think…

That's...not how it works. You can expense cell phone bills and lunches, sure, but VCs aren't paying for your fancy apartment. > EDIT: I'm not a tax person Most non-tech discussions on forums like this one should start and end with this disclaimer. Watching people here regularly talk about topics like law, "money laundering", write-offs and tax shelters is as hilarious and disconnected from reality as a hacking scene…

Ultimately, VCs are paying for your fancy apartment. They're just paying more the more expensive your personal life is. I wouldn't dismiss the obviously aligned incentives here that encourage minimization of capital expenditure for business entities, especially in the USA.

I'm making no moral or legal judgements, just commenting based on what I've encountered and witnessed. I'm not a founder and never consulted anybody with legal qualifications regarding this matter either in any specific instance. But, in my anecdotal experience, there is a rather broad spectrum of contexts and interpretations on how to do what's best for you and the business in your specific situation. On the flip side, it's not a big conspiracy, in the USA we heavily subsidize the pursuit of new enterprise. And the law reflects that. Smart people and successful businesses minimize their tax liability.

Re: I surveyed 500 startup founders about their salaries

#82

Post by yrgulation » Mon, Oct 17, 2022, 7:03 PM UTC

earth_walker wrote: post #77

yrgulation wrote: post #68

Earlier quoted context omitted.

I am pretty sure in europe there are. Crazy that stuff like diversity among countries has to be explained on a tech site.

Here in Canada private companies can and do pay dividends to their shareholders.

Well exactly.

Re: I surveyed 500 startup founders about their salaries

#83

Post by dcow » Mon, Oct 17, 2022, 7:06 PM UTC

jrochkind1 wrote: post #48

dcow wrote: post #26

Earlier quoted context omitted.

It all really depends on your situation and context. Does your company have an office yet? If not it's probably the founder's residence. I've heard of apartments listed as offices in very early days. It's not about committing fraud, it's about working with what you've got. But for sure paying founders a low salary and running everything through the business is a tax-conscious strategy to minimize overall expenses.

The IRS does not really agree. Home office expenses got quite a bit stricter a few years ago, and even before that expensing your entire apartment because you worked out of it was probably not technically allowed. https://money.usnews.com/money/personal-finance/taxes/articl... However, the IRS has very little staff to audit or enforce, you can probably get away with breaking the rules... until you don't.

The home office thing is a personal deduction that an individual can claim. I'm talking about scenarios more akin to "the founder sleeps in the company office".

Re: I surveyed 500 startup founders about their salaries

#84

Post by jrochkind1 » Mon, Oct 17, 2022, 7:09 PM UTC

dcow wrote: post #83

jrochkind1 wrote: post #48

Earlier quoted context omitted.

The IRS does not really agree. Home office expenses got quite a bit stricter a few years ago, and even before that expensing your entire apartment because you worked out of it was probably not technically allowed. https://money.usnews.com/money/personal-finance/taxes/articl... However, the IRS has very little staff to audit or enforce, you can probably get away with breaking the rules... until you don't.

The home office thing is a personal deduction that an individual can claim. I'm talking about scenarios more akin to "the founder sleeps in the company office".

Where the "company office" just happens to be a (from GP comment we are all replying to) "fancy SF and NYC apartment" in a residential building?

I mean, I'm not a lawyer or CPA, and I'd advise any HN readers to consult such before deciding on a tax strategy based on HN thread. Because, also, yeah, no.

Honestly, if you are sleeping in an actual office as your primary residence, you probably technically have to include the fair market value as income on your personal taxes, but if you're really on a couch in an office building maybe you can get away with it (until the landlord of the office building kicks you out because it's not zoned for or up to code for residential and thus illegal for them to rent to you for that purpose). If it's a residential apartment... sounds like out and out tax fraud to me. I am not a lawyer and this is not legal or tax advice.

Re: I surveyed 500 startup founders about their salaries

#85

Post by ghiculescu » Mon, Oct 17, 2022, 7:27 PM UTC

yrgulation wrote: post #82

earth_walker wrote: post #77

Earlier quoted context omitted.

Here in Canada private companies can and do pay dividends to their shareholders.

Well exactly.

All of this depends on the company being profitable, which young startups typically aren't and probably shouldn't be.

Re: I surveyed 500 startup founders about their salaries

#86

Post by dcow » Mon, Oct 17, 2022, 7:35 PM UTC

jrochkind1 wrote: post #84

dcow wrote: post #83

Earlier quoted context omitted.

The home office thing is a personal deduction that an individual can claim. I'm talking about scenarios more akin to "the founder sleeps in the company office".

Where the "company office" just happens to be a (from GP comment we are all replying to) "fancy SF and NYC apartment" in a residential building? I mean, I'm not a lawyer or CPA, and I'd advise any HN readers to consult such before deciding on a tax strategy based on HN thread. Because, also, yeah, no. Honestly, if you are sleeping in an actual office as your primary residence, you probably technically have to include…

I mean I've actually seen founders living out of work/life spaces. Not the WeWork type. The type where a large commercial or industrial building is converted into a "co-working-living" space. Not a lawyer either so I have no idea if it's legal to the letter of the law, but it exists.

Re: I surveyed 500 startup founders about their salaries

#87

Post by catsarebetter » Mon, Oct 17, 2022, 7:37 PM UTC

tobyjsullivan wrote: post #30

There's an interesting blip at the end of the chart "Bootstrapped vs. VC-Backed Salaries Breakdown". Salary Range Bootstrapped VC-Backed -------------- ----------- -------------- 200k-249k 3% 6% 250k-299k 1% 3% 300k+ 6% 2% Overall, I see a pattern that could be explained by slightly different perspectives. A VC-backed founder likely sees themselves working for someone else - "My work will benefit the investors, so I…

Yeah, in Company of One they say Peldi from Balsamiq takes 1 mil per year

Re: I surveyed 500 startup founders about their salaries

#88

Post by catsarebetter » Mon, Oct 17, 2022, 7:39 PM UTC

mousetree wrote: post #5

dcow wrote: post #4

I think what people often blissfully miss about founder comp is that the business literally supports the founder's entire life. Everything is a business expense. Pay yourself 50k as a little bonus and run almost everything through the business, because if you don't survive, neither does the business. You think founders are paying out of pocket for their fancy SF and NYC apartments at 50k per year living humbly? Think…

In what kind of startups is this happening in?! Edit: in our early days, if one of the co-founders did this, we definitely would've parted ways.

Yeah I interviewed at a recruiting startup and the founder was writing off his brand new sports BMW and at the time I was like omg that's so cool and now I'm like omg that's so shady

Re: I surveyed 500 startup founders about their salaries

#89

Post by dcow » Mon, Oct 17, 2022, 7:48 PM UTC

scient wrote: post #61

yrgulation wrote: post #28

Earlier quoted context omitted.

Would be nice to have data available on this.

If the company is not public, there are no dividends. Crazy that stuff like this needs to be explained on a tech site.

This is not strictly true. A company can pay dividends if it's profitable at any point in time. Whether it's publicly traded doesn't matter. Whether it's a good idea or not is another question.

Re: I surveyed 500 startup founders about their salaries

#90

Post by yrgulation » Mon, Oct 17, 2022, 7:59 PM UTC

ghiculescu wrote: post #85

yrgulation wrote: post #82

Earlier quoted context omitted.

Well exactly.

All of this depends on the company being profitable, which young startups typically aren't and probably shouldn't be.

I know, but having data on it helps. I am curious how many of these funded companies actually generate profits for their founders and how soon. It may be that despite large investments returns are slim, meaning many such startups are a waste of time.