How Do I Pay Myself?

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As a business owner, it is already a challenge to start and build a company. Even if it is just a little store in the middle of nowhere, you still want it to be as successful as possible. It is defined by the way you manage it though, and that process will continue even if you are already at the top of your game. As a business holder, it is safe to say that you are already getting paid because of the profits.

 

However, most of these would go back to operations and employee salaries, among other expenses. How would you pay yourself as a business owner? Many factors can determine this payment. 

 

Determining Your Pay

  • Know Your Business Type

 

The first thing that will determine how you would get a salary is through your business type. Several factors can differ from one company to another, from field or discipline to size. As an owner, you should have an idea as to how everything works inside and outside the company. If you are not precisely the hands-on type, then maybe it’s time to review and learn all about it. Or, you can help third-party help like Annette & Co. for expert advice. Either way, it will help you manage others as well in the future if that is where you want to go.

  • Choose a Method

 

Now, this is another thing that you should decide on, especially if you are in a small business. Larger ones tend to have already a payment scheme already established by the time you step in. Even if that was the case, you still have the power as owner to choose. But, of course, this also depends on the situation.

 

There are two basic methods. The first one is the owner’s draw, where you take a portion of your company’s equity for personal use. If you are a sole owner, then this would be easier since all you need to do is subject this through usual accounting records. On the other hand, you would still need to be transparent about it. As long as it shows by the end of a cycle, then it would be ok.

 

On the other hand, you can still set up a salary for yourself. It is your right as the owner of the business, especially if you are also handling operations. For larger companies, this would be determined by stockholders as well. This amount, unlike the draw, is taxable, and this would automatically be in the records.

  • Determine the Appropriate Amount

 

Arguably, this is the most crucial part of this operation. There has been an ongoing belief or tradition that the owner would not have anything until the company stabilizes. It is a sacrifice you need to make so that business would continue. Some experts would agree with this sentiment, but this is now changing. 

 

The concept of the draw has been gaining popularity, especially for startups. Meanwhile, you would also need to consider the state of the company. Reviewing the records and seeing the growth and profit will be your standard in determining the right amount.

 

Conclusion

 

As an owner, you do not need to sacrifice, especially since it is also your right to have an income. You only need to know how to give yourself the right amount and the right time for it. For one, you would still need to establish a schedule so that it would also be appropriately recorded in the accounting books. 

 

Also, the format that you will be receiving will be determined so that it would be for the benefit of the company as well. It might take some time for a business to set up and succeed, but at least you would have something for yourself.

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Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.

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