When Can I Start To Pay Myself In My Business

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Photo by Andrea Piacquadio: https://www.pexels.com/photo/portrait-photo-of-woman-in-red-top-wearing-black-framed-eyeglasses-standing-in-front-of-white-background-thinking-3762807/

You became a business owner to live the dream life. The one where you sleep in and take vacations when you want and earn a living from the fruits of your labor. This all sounds delightful, right? The reality according to a survey from Fundera is that 30 percent of small business owners don’t take a salary.

WAIT!

What happened to that vision of living the dream life? At least when an employer was a part of the equation a paycheck was delivered regularly. 

So what gives? 

Why are business owners NOT paying themselves? There could be many reasons, but one of the main reasons could be that they don’t know when they should draw a paycheck from their business. Here are a few factors to consider to help you decide to pay yourself:

  1. Is your business profitable? If you look at your profit and loss statements and see a positive net income number, it might be time to start paying yourself.

  2. What stage is your business in? If you’re in the early stages of your business then it makes sense to put everything back into the business to help it grow and press pause on paying yourself. However, if you are in a growth stage in your business, it might be time to earn an honest living and pay yourself.

  3. If you are a sole proprietor for example and your tax bill is out of control then putting yourself on the payroll might be the way to go. Discuss your thoughts about paying yourself with your tax professional. They will be able to assess the best course of action to take depending on your entity type and tax situation. 

There you have it! 

I hope these factors will help you in your decision-making process.

It’s so important to know if your business is profitable or not. That is the starting point. The very next thing to do is talk with your tax professional to start planning when and how to pay yourself. You work hard and deserve it.

Keep It Sunny!