Paying Yourself?

[Gavin 14]

Hey guys,

I haven't really seen this issue talked about, maybe it has but I haven't run across it recently.

How do you guys handle paying yourself? In my first year I have really just been using the money I have made to pay off my start-up costs. I'm finally in the black and now I'm trying to figure out how to pay myself moving forward. I have the luxury of a wife with a very good job so I haven't had to rely on my business alone. I realize I should be taking at least 30% (net) and putting it away for taxes but I wanted to get some input before I really start making a lot of money next season.

As always, thanks for your input!

Gav

[RyanH 14]

As a small business, you are able to take the entire amount you make to do with as you please, since you *are* the business. If you incorporate or get set up in a partnership, then you have to pay a salary to yourself from your business account. you also have to record that salary as a business expense and deduct it from the net income of your business (good) as well as matching any taxes associated with payments to yourself (bad). Things get really wierd when you have employees.

[Aplus 525]

I use a payroll service to handle checks, tax deductions, and tax payments to the IRS. So I draw a paycheck for each pay period. The amount you decide to take depends on the amount of money coming in, as well as what you need for your living expenses.

[PressurePros 248]

You really shouldn't have any taxes the first few years. Or at the very least a very low liability. Uncle Sam expects the first 3-5 years of a startup to be red or break even. I cant and won't get into the intracasies of deductions but it helps to have an accountant that is bold and knows the tax laws well.

[Henry B. 4]

My wife and I are on salary, We choose to pay ourselves only what we need to pay bills and have some money left over to play with. I'm a bit different than most though, I'm not trying to make a huge sum of money. Just enough to enjoy my life and family.

[Gavin 14]

I have an accountant so that's not the problem. Granted, I spend what I need to when I need to but I was just wondering if you guys take a percentage of your net for your pocket and put the rest into business savings, equipment, etc.

Gavin

[timhays 14]

the only money i recieve personnally is for any personal non deducting items i want,everything else gets reinvested into the business and deducted accordingly.

[Henry B. 4]

I agree with Tim,

The first few years every dime went right back into the company except for just enough money to cover my personal bills.

As a matter of fact, I still do just about the same thing.. When we have a lot of money laying in the account that I know will nail me on taxes I go buy something for the company.... or, I give all my guys the day off and take them deep sea fishing as a company party or outing.

[PressurePros 248]

Gavin, a "for example" :

You like hockey... The business buys season tickets to your favorite team. You give away a few each season as a customer promotion. Deduction as a business expense, no income tax. Having an accountant is great and I assumed you had one, but the key is one that can push the envelope and still put his signature at the bottom of your forms. All tax liable income I generate is spent through the business. When the business is "broke" and I need equipment I loan the corporation money. I then have the corporation pay me back with interest (another deduction for the business and a way to "pay" yourself)

[Beth n Rod 1,279]

It really depends on how you set up the books and the way you incorporate.

We pay ourselves a check just like the rest of the employees. sub chapter 'S' or llc is a good way to go...and yes...you can change it if you already have it set up differently. Talk to you accountant or lawyer to see what is best for your company.

Rod~