How Do I Pay Myself?
You deserve to pay yourself. 👏🏼
But how?
When you own a sole proprietorship or LLC, your paychecks are called owner’s draws.
You can pay yourself whatever you’d like and how often you’d like, just make sure to pay yourself with what’s left after your expenses and taxes.
Because owner’s draws are not tax deductible, meaning you can’t write them off.
Where Your Owner’s Draws Come From
Gross Income - Qualifying Expenses = Net Income
Net Income x Your Tax Rate = What you owe in taxes
Net Income - Taxes = What’s left for your owner’s draws
So make sure you have enough money set aside for expenses and taxes before paying yourself.
Psst! So you don’t accidentally factor your quarterly taxes or owner’s draws into your expenses, set both of them up as equity accounts in QuickBooks.
Watch the Reel!
How much can you pay yourself?
It’s advised to pay yourself the same amount over a set frequency. I pay myself weekly.
If your business has been around for at least a year, you should have a general understanding of your high and low periods, so you can average what’s left over after expenses and taxes have been paid and divide it by your draw frequency.
But always make sure to bank some money for emergency expenses or if your business hits a slow spell. Do not pay yourself everything that’s left after expenses and taxes.
How to Pay Yourself
Now how do you actually get money from your business bank account to your personal bank account?
You can write yourself a check or transfer the money directly. I have an automated transfer so my owner’s draws happen effortlessly!
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Hey there! I’m Meg:
LOVER OF CATS, ROLLER SKATING, AND VW BUGS
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