Do You Know How to Pay Yourself When You Own a Business?

As the business owner do you ever wonder how to pay yourself? You pay your employees regularly, but how do you actually get paid? First of all, the IRS does not consider sole proprietors and partners in partnerships an actual employee; they are considered business owners. In corporations, if the owner provides services to the corporation, then they are considered an employee. So if you’re a corporate owner, you would pay yourself the same way you do your employees.

Now let’s take a look at a few Tips on How to pay yourself when you own a business:

Tip 1 ~

Ø     Keep your business and personal accounts separate. This means do not write checks for personal expenses out of your business account.

Tip 2 ~

Ø     Choose if you’re going to withdraw money from the company account or give yourself a salary. Each system depends on the federal tax classification that you select.

Ø     These are not easily interchangeable, so be sure to continue with the method in which you pay yourself.

Tip 3 ~

Ø     Make sure you record each personal withdrawal as an “owner’s draw.” These are not considered a business expense.

Tip 4 ~

Ø     If you decide to pay yourself a salary, make sure you pay Payroll taxes and withholdings for yourself and employees.

Ø     It is important to report your pay on your personal tax return as earned income. (Due to you did receive a pay check)

As you can see, as a business owner getting paid is not that difficult. It is however; very important to keep business and personal separate. Also remember to keep records of your expenses and save them for the appropriate amount of time. Professor Tax USA specializes in accounting, bookkeeping and taxes. If you have further questions regarding “Getting Paid” contact us and we will gladly help you.