Getting Paid as a Small Business Owner.

No matter how much you love your work, you don't want to do it for free. Figuring out how to pay yourself is an important early step in any business set up. Your options are heavily influenced by your business entity type. If you have an LLC filing taxes as a sole proprietor you can't run true payroll for yourself. You are limited to owner draws to pull money from your business to your personal. Plan for your taxes separately through estimated quarterly payments or setting aside money throughout the year. If you file as an S-corp you need to run traditional payroll & you will need to pay yourself a "reasonable wage". Taxes will be taken out and paid automatically throughout the year.

No matter how you file, you will need to determine how much / how often to pay yourself. Often business owners fall into the trap of transferring money back & forth, willy nilly with no real plan. This starts to build confusion, resentment & burn out. You need to feel like your business is helping you move toward the life you want & that definitely has a financial component. If you are new, I advise deciding on an amount you can move automatically once or twice a month without fail. This may be a set amount, like $500 twice a month. Or it could be a percentage of your sales or gross income, like 25% of all gross income for the first half of the month, transferred on the 20th. That allows you to start to budget on the personal side and helps you feel like you are moving in the right direction. You can do other transfers as needed as cash flow permits. As your bottom line consistently increases so should your set draws or paychecks from your business.

As you grow, this can start to include putting a consistent amount into retirement and HSA accounts, building savings for personal or business emergencies and planning for growth or expansion.

Paying yourself as consistently as you can helps you feel successful, minimizes resentment & helps you to stay on track in both your business and personal finances. If you want to strategize about the best way to do this in your business, get in touch to set up a meeting.