A company does not receive salary. As a contractor, the company you own gets paid from the company you work for. Therefore you do not receive salary. If you are an employee for a company (not a contractor!!!!), you receive salary. This is my own understanding. IS this correct? What exactly is salary?

Curious about mainly US jurisdiction

  • 5
    Are you just concerned with the terminology or is there a secondary question (e.g. taxes) that you are trying to understand?
    – D Stanley
    Commented Dec 1, 2021 at 14:55

1 Answer 1


What exactly is salary?

Salary is a fixed compensation paid to a person for work or services. Contracting work is typically billed by how much time was spent on a project, plus possibly compensation for other expenses (materials, driving, meals, etc.). There are other consequences in the US when distinguishing between salaried employees, "hourly" employees, and contractors, such as labor laws, minimum wages, overtime laws, whether you can receive benefits, etc.

Say you own company A that is a contractor to company B. Company B pays Company A for services (not "salary"). How do you get the money out of Company A to pay your bills?

It depends on the setup of Company A. If Company A is a single-owner company or other "pass through" entity, then everything that the company makes is "income" to you and can be used for personal expenses. If it's a more complex structure, you may need to get paid a salary from company A, or pay yourself dividends periodically, or something else. You may then need to have better separation between "personal" and "business" expenses.

So it may not by strictly "salary" but it is still income to you in some manner.

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    As a contractor, you can also be paid by the job. E.g. if I hire a contractor to remodel my kitchen, they will probably quote a set price for the job.
    – jamesqf
    Commented Dec 1, 2021 at 18:09

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