Distributing company profits by dividend

Distributing company profits by dividend

There are essentially two ways that a company owner can pay themselves. Owners of limited companies need to decide whether to take a salary form the business or whether to withdraw a dividend from the company. The first choice of paying a salary is similar to paying any employee of a company. Payments are made on a regular basis and relevant taxes need to be paid and reported to the tax authority. The second alternative is for profitable companies to distribute funds to shareholders by way of a dividend.

A dividend payment is made to a shareholder of the company. A company director will need to draft a dividend voucher and a resolution or minutes recording the decision to distribute funds from the company. The payment should then be reflected in the company’s accounts.

dividend voucher