Working for yourself as an entrepreneur is rewarding and fun but the ultimate goal of any for-profit business owner is to earn income from their business. When your business is ready, here are
five tips on how to draw an entrepreneur’s paycheck.
First, make sure your business is financially able to pay you.
If you aren’t consistently showing a profit and have some cash reserves in the business, don’t start withdrawing money yet. You’ll only hurt growth and potentially put the business at risk. In this situation, you need to live off of another income source or savings until the business becomes reliably profitable.
Second, determine whether you take a regular salary or an owner’s withdrawal.
The former gives you a set paycheck much like an employee would receive, and the latter pays you from the company’s proceeds. Which method is required or preferred depends on mulitple factors begining with entity type.
Third, figure out what a reasonable salary would be if you hired an employee to do the operational work you currently do.
If you do need to pay yourself a salary, job postings at other businesses and online salary reporting websites are helpful for this. The numbers you see will prove an estimated range for your salary.
Fourth, consult a certified public accountant to review the tax implications of withdrawing a paycheck.
Speak with a CPA before you begin, so you can take advantage of any tax-savings opportunities they identify.
Finally, actually start taking the paycheck and enjoy it.
You’ve worked hard to reach this point, and it’s time to enjoy the fruits of your labor.
To speak with a CPA about your business’ situation and taking a paycheck, feel free to talk with us at Brock CPA.
Best of luck on earning a paycheck,
The Team at Brock CPA