Entrepreneurs often think that the money in the company is “their money” and that they can simply transfer it from the company’s account to their private account.
Just like that – without anything further.
Especially when the managing director and shareholder are the same person.
Not so fast, as our Czech neighbours would say. In practice, however, it does not work that way.
A company is a separate legal entity, distinct from its owners, and the money in the company’s account belongs to the company and not directly to its shareholders. Yes, even in the case of a so-called single-member company (a company with a sole shareholder).
If shareholders and/or managing directors withdraw money without a clear legal basis, they face the following problems in particular:
- disorder in the accounting records, unreconciled payments, an increase in the shareholder’s liabilities to the company without a legal basis,
- tax risks during an audit,
- tension between shareholders when it is not clearly established who withdrew the money and on what basis, and particularly whether the other shareholder consented to it,
- the company’s capital strength on paper and in reality differ vastly, which may affect a potential sale of the company or its purchase by a third party.
The good news is that in practice, undesirable and unsupported withdrawals of money can be effectively prevented.
There are several legal and common ways, in which a shareholder and/or managing director can pay themselves money from their company.
You only need to know:
- under which legal regime the payment will be made,
- what the legal basis for such a transfer of money is,
- how to properly structure transfers from an accounting and tax perspective
- and, last but not least, it is essential to remember the rule that “substance prevails over form”.
In this article, we will go through the most common options, which entrepreneurs can use, namely: are:
- managing director’s remuneration
- share of profit
- loan to a shareholder
- remuneration for the provision of intellectual property rights (rent, licence fees, remuneration for copyrighted works)
- less common forms include withdrawing funds from a capital fund or reducing the registered capital, due to the administrative burden
Managing director’s remuneration
If you are also the managing director of your company, the simplest and most transparent way to remunerate yourself regularly (or occasionally) is to pay managing director’s remuneration.
A managing director may enter into an agreement on the performance of their duties with the company, which stipulates the managing director’s remuneration. From a tax and social security contribution perspective, this remuneration is similar to a salary, but with important differences that make it efficient and result in a lower contribution burden for the company.
The advantage is simplicity and transparency: (i) it is common and provided for by law that a managing director may receive remuneration for performing their duties agreed in an agreement on the performance of their duties with their company, (ii) the agreement on the performance of duties must be approved by the general meeting or by a decision of the sole shareholder.
Share of profit (dividends)
A very common way of obtaining money from one’s own company is to receive a share of the profit. Compared with a salary, a share of the profit (in practice, also often referred to as a dividend for an s. r. o.) has the advantage that it is not subject to social security or health insurance contributions. On the other hand, it can naturally be paid only when the company actually makes a profit. Payment of a share of the profit is currently subject to withholding tax (for 2025, the withholding tax is 7%).
Loan to a shareholder
It is a Slovak tradition to provide loans from a company to its shareholder. In such a case, this is a standard legal relationship: the company is the creditor, which provides a certain amount at a certain interest rate, and the shareholder is the debtor, who is obliged to repay the principal owed together with interest.
An important factor is that the loan must be:
- properly regulated by contract,
- provided with terms governing its provision and repayment (particularly its maturity), also taking into account the method of provision and repayment – whether in cash or by cashless transfer, with regard to the ban on cash payments
- had the loan interest set, and not arbitrarily determined but market interest.
Remember, the loan must be repaid. If the loan were never repaid and/or were not properly documented, the tax authority could consider it a hidden distribution of income. However, there are also options in the form of its capitalization.
Payments to a shareholder / executive director in the form of other entitlements – rent, licence fees or copyright royalties
There are still several legal mechanisms through which a shareholder, as the owner of a company, can receive money from their company. Some of them are less well known, but often very effective, particularly in terms of the tax and social contribution burden.
One of these options is the payment of money on the basis of other legal relationships between the shareholder and the company. In such a case, these are not ordinary wages, dividend payments or loans – but payments that the company makes to the shareholder as a legal / natural person or to the executive director as a natural person.
These are payments (usually remuneration) for the provision of a particular right and the permission to use it or the provision of a service, such as:
- rent (for example, for office premises, a warehouse, a parking space or equipment),
- copyright royalties,
- licence fees for intellectual property, for example in the form of trademark licence fees.
The last option – trademark licence fees, is a relatively interesting and increasingly used form in business practice.
Why?
“Because a trademark, as a registered right to a designation, represents protection of identity in the business world for each of its owners or licensees entitled to use it“, states JUDr. Zuzana Skýpalová, the owner of the SKYLEX law firm and an expert in trademark registration at both regional and international levels.
The establishment of a company naturally involves creating a company name, brand or logo under which the entrepreneur presents their products or services. From both a marketing and legal perspective, it is therefore very important to ensure that no one else can use this brand. This is precisely what trademark registration.
is for. A trademark does not necessarily have to be registered in the company's name – its owner may just as well be (i) another, e.g. sister company, or (ii) a natural person – the owner of the company, which will nevertheless use the designation.
In practice, trademark registration brings an interesting benefit that is discussed less often, namely the creation of a legal way to pay oneself money from the company that uses the trademark, if the provider of the rights to it is its executive director or shareholder.
The principle is relatively simple:
- the natural person owns the trademark,
- grants their company a licence to use it (exclusive or non-exclusive),
- the company pays the licence fee for using the brand to that natural person.
Such a licence fee represents a legal income of the natural person (the trademark owner, who may also be a shareholder of the company in question that uses the trademark in its business).
Of course, it must always be a real and proportionate relationship, meaning that the brand must actually be used and the amount of the licence fee must be set reasonably and proportionately. It is necessary to observe the principles of an arm’s-length relationship, mandatory documentation and the proportionality of the licence fee amount.
The main advantages of registering a trademark include in particular:
- brand protection – no one else may use the same or confusingly similar brand in the same segment and territory,
- licensing opportunities – the company may pay licence fees for using the brand to its owner,
- building brand value – the trademark becomes a separate asset with economic value,
- grant support opportunities – in some cases, it is possible to obtain a financial contribution towards trademark registration.
If an entrepreneur already owns a trademark as an individual, it is relatively easy to establish a licensing relationship between them and their company through a license agreement.
This primarily determines the scope of use of the trademark and the amount of the license fees.
If you do not yet have a trademark, registering one may be a sensible step for several reasons. In addition to protecting the brand, you also gain the opportunity to work with it as a valuable asset – whether through licensing, sale, or building the value of the company for the future.
A trademark can be registered:
- in the territory of the Slovak Republic, or separately in other territories (regional registration)
- at the level of the entire European Union,
- or internationally for multiple countries.
The choice depends primarily on where the entrepreneur plans to use their brand. If the trademark is set up correctly – both legally and tax-wise – it can serve several functions at once: protect the company's identity and build customer trust while also creating a transparent and legal mechanism, through which the shareholders can pay themselves money from their company.
Our law firm, SKYLEX, will handle this entire process for you, whether it involves trademark registration, applying for a grant, or creating a license agreement.
