Business Owners: Put Yourself On Payroll!
Don’t trade your profits for work done as an employee!
Often I see business owners make the mistake of not paying themselves through payroll. They do this because they want to avoid or delay paying payroll (income) taxes. Reality check: You are going to pay taxes! Eventually you will have to pay!
The question is how and how much .
Not all of your personal money from your business has to come from payroll but I decent amount should.
First you want to pay yourself for the hard work you do in your business. That work should be counted as labor cost just like any other employee. Your hard work should be deducted as a business expense NOT as an owner’s profit.
The mistake that owners make is either taking personal expenses directly out of the business account or taking an “owner’s draw”. Both of these actions hurt your company!
A business owners personal expenses, like a “draw”, is not an expense that would lower taxable profit, it reduces the equity of that business owner and thus lowers the value of the company. There are also other methods for owners to take money out of their company in addition to payroll that may be more tax friendly. Contact us to find out!