How to Pay Yourself as a Business Owner
September 27 2019 - Money management is one of the most important factors of a successful business.
These days, more and more new businesses are failing at this, with 60% of startups going bust within their first three years.
To make sure yours avoids this fate, you'll have to figure out how to pay yourself as a business owner.
In this post, we'll break it down for you.
Tips on How to Pay Yourself as a Business Owner
If you're worried about the complexities of the payroll process, don't be. Here's how to navigate it as the head of your company.
Start With an Owner's Draw
As a small business owner, it can be difficult to set yourself a salary.
When your turnover and profits are constantly fluctuating, you may not be able to define an amount that you can afford to take every month. You don't have to do that.
Instead, you can withdraw funds from your business in the form of a personal draw.
This means identifying an amount of money that you previously invested in the company, then removing it for personal use.
These funds aren't taxed at the time you withdraw them. However, you will need to add them into your annual tax return. Otherwise, you could face some expensive and dangerous consequences.
Set a Salary
While owner's draws may work for you when you're just starting out, you will eventually have to decide on a salary for yourself.
To figure out what amount you should go for, take a long, hard look at your financial records. Study your profit and loss and see what you can afford to take.
Then, figure out what you're worth. Take an objective look at the role you play in your company and compare it to how people in other businesses are paid for similar types of work.
Make sure it's reasonable. Be realistic and keep your business goals in mind.
Put It Through a Payroll System
You don't have to handle all of your payroll responsibilities internally.
If it's too much for you, you can always outsource it to an HR company. Alternatively, you can use payroll software to streamline the process in-house.
Choose a payroll service provider that fits your business, and it will automatically set payment schedules, calculate taxes and produce payroll reports for you.
Use a Paystub Generator
As proof of your payments, you'll need to produce pay stubs.
Even business owners aren't free from this pesky paperwork! Thankfully, companies like PayStubCreator make the whole process quick and easy.
All you need to do is choose a template, fill out your information and print out your stubs.
Get Started Today
Now that you know how to pay yourself as a business owner, the next step is to define your payroll process.
Then, you can figure out how to pay your employees, too.
As well as paying reasonable rates, you'll also need to have great people skills. Otherwise, you could have trouble retaining your staff.
Check our HR updates for more tips on how to manage people and payments in your business.