A Guide to Setting Your Own Salary

If you own your own business, how do you go about paying yourself?  Do you have a salary that is predetermined?  Do you just bring in a percentage of your profits?  What do you do if you haven’t started becoming profitable yet?  You will want to have a plan in place, this is especially true if you are just starting your business up.  If you don’t have a plan, then you may find yourself just bringing in what is left after you have paid all of your bills, or worse, nothing at all.

Here are a few things that you will want to consider when you are deciding on your salary:

  • Growth – While your business is still growing, you will need to have some type of cash flow.  You don’t want to get in the way of the cash flow.  You might want to start out by paying yourself a minimal salary, and increasing it over time as you grow and expand.
  • Ownership – When you are working on your business, you will likely spend a lot of time and take a lot of risks.  This has a value.  If your business takes off well, you will get rewarded.  IF it does not do well, then you will have to take the losses.  You will want to learn more about payroll to help you determine what is a fair wage for what you do.
  • Finances – Paying yourself will help to give your investors a better picture of where your business is headed.  If you don’t include a salary in with your expenses, then your business may look like it is better off than it really is.  If you are just starting out, you might want to reinvest your salary into the company.

When you are a sole proprietor, or even a partner, your income will be personal income when you file your taxes.  If you own a corporation, then you have some other options.

There are many things that you will want to consider.  You might even want to find someone that can help you with managing your financial accounts.  You might want to consult a professional accountant, lawyer or financial planner. You will want to be realistic and reward yourself, but at the same time you might have to make a few sacrifices to begin with.