But as they say: with great power comes great responsibility.
Finding the fine line between rewarding yourself and investing in your business can be difficult. You want to balance growing your business while also providing yourself with the financial security you need to make responsible decisions.
If you’ve ever struggled with figuring out when and how to pay yourself, this post will help.
How to Sell Online
Tips from Ecommerce Industry experts who provide guidance to small business owners and aspiring entrepreneurs.
Email Address
subscription
I agree to receive the newsletter. I can unsubscribe at any time.
Pay Your Own Way
While a monthly salary is obviously a widely accepted way to pay yourself, there are many other options. As with anything money-related, each has its pros and cons.
Monthly income
If your business is registered as a corporation (C Corp or Corporation) in the United States, you can pay yourself a monthly salary. You receive a fixed income each month from the company's profits. The specific amount is determined by the shareholders.
In certain business structures (such as corporations in the United States), you have a legal obligation to pay yourself a salary, no matter how small the amount.
advantage:
A monthly salary is predictable, stable, and makes accounting easier.
Getting a paycheck means you can invest in a retirement plan, such as a 401k or Canada Retirement Savings Plan .
shortcoming:
Salaries are 100% taxable, so this may increase your tax burden, depending on your country and tax bracket.
In some countries, you are responsible for creating a salary account with the tax authorities to pay your wages.