In the last of my looks at extracting profits from small to medium-sized businesses, I compare the two main ways the owner-manager could do this.

Although working shareholders are in a position to reward themselves in a number of ways, the main area of choice lies between paying bonuses or dividends.

The critical issue in this decision is the rate at which the company pays tax.

If the company is paying tax at the new corporation tax starting rate of ten per cent or the small companies rate (20 per cent), it is usually beneficial to extract surplus funds by means of a dividend, as they do not incur National Insurance costs.

Another important factor to consider is that advance corporation tax has been abolished on dividends paid after April 5, 1999, making them more tax-efficient.

A higher rate tax, at an effective rate of 25 per cent on the net dividend, is payable by higher rate taxpayers but there may be a long delay before the higher rate tax actually has to be paid. This may suit your purposes.

On the other hand, if the company is paying tax at the full (30 per cent) or higher marginal rate of corporation tax (32.5 per cent), the overall tax liability will be slightly lower if surplus profits are taken as a bonus rather than a dividend.

In reality, cash flow and timing considerations may mean there's little difference between the two methods.

If the firm's taxable profits are likely to fall in the marginal rate band (between £300,000 and £1.5 million), a bonus could be paid to reduce the profits to the small companies rate level (giving relief for the bonus at the marginal rate of 32.5 per cent).

The remainder could be paid as a dividend.

The debate is further complicated by a number of other factors too involved to mention here, but in short, directors and shareholders in family businesses still have something of a balancing act to perform.

Finding the most tax-efficient combination of renumeration, bonuses and dividends for a particular individual will, as ever, depend on how much there is in the pot, how much they need to take out, when they choose to take it and in which financial form they prefer it.

If juggling these factors falls within your definition of fun, go ahead.

If not, take advice from a qualified professional and heed it.