compensationIf I possess a limited company with myself as the sole directory / shareholder. I have developed from home in my spare time, software that is used everyday in my company.
Can I pay myself royalties for the use of this software? If yes, should I sign an agreement between myself (the directory of the company) and myself (me as an individual)?
The background of the idea is the following, i have worked long hours to create the software which is a must-have for the company. However, it is an asset and it is my asset not the one of the company. If i sell the company or if someone takes over, then, it would be better if a royalty agreement would exist between me and the company.
Yes, you can. You can compensate yourself with any mix of salary, disbursements (dividends), royalties, licensing fees, fringe benefits, cheap loans, etc. Heck, you can buy a house and have the company pay it off. As long as you have legal authority to decide what the business does, you can make the business do anything that is not otherwise illegal.
The question is not can you, but rather should you.
I can’t speak too much for the French Tax system as I am not French, however I am almost certain your system distinguishes different forms of income for taxation purposes as most tax systems do. Different forms of income can be taxed at different rates and can be applied differently in terms of how the government allocates your tax money. Having the right mix of compensation is important to business owners because you want a strategy that minimizes taxation, maximizes entitlements, and keeps you out of trouble with governments concerned about tax avoidance.
Getting advice from a qualified local tax advisor is in your interest.
As a practical matter, paying yourself royalties may require extra accounting paperwork as you now have two businesses – the LLC and the intellectual property software business.
So what you want to know is whether the company (LLC) can pay you royalties for software that you developed and use…Well, yes, you can. But what sense does that make if you’re the sole owner of the LLC? IT would be like taking $20 out of your left pocket and putting it into your right pocket, thinking you’re now $20 ahead.
This would be a wash, meaning neither you nor the LLC gains from it.
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