How do you pay yourself?

[Shorts]

I posted this under business mgt. with limited response so I figured I'd try it here...

Hey guys just wondering how you all decide what to pay yourself. My accountant suggests I pay myself what I need to live on which in my case is only about $2,500 after taxes per month. He also mentioned that if there was $30,000 in the account after everything at the end of the year I could always pay myself a bonus.

Looking forward to how you guys do it.

Also, are you operating as a sole, LLC or S Corp and why.

Thanks guys....awesome site!!!:usflag:

[guven]

I posted this under business mgt. with limited response so I figured I'd try it here...

Hey guys just wondering how you all decide what to pay yourself. My accountant suggests I pay myself what I need to live on which in my case is only about $2,500 after taxes per month. He also mentioned that if there was $30,000 in the account after everything at the end of the year I could always pay myself a bonus.

Looking forward to how you guys do it.

Also, are you operating as a sole, LLC or S Corp and why.

Thanks guys....awesome site!!!:usflag:
I want to pay myself something but most of time there was not enough money inmy business account and I did not get any money
I work free, I run solo company, because at the begining, to open a sole is easy and cheap, but I want to be LLC now
I read a lot pros and cons to be solo or LLC
LLC I think way to go
if I have money in bank , I write $500 to $1500 check and pay myself, 2 or 3 times a month , I also pay my credit cards, my insurance, my rent ..etc throught the my business account,

[topsites]

Solo, 1k / month.

It's all I need, way I see things, here's the problem:
- Whatever I pay myself gets taxed heavy.
- After that, whatever is profit gets taxed even heavier.

So I spend my money on supplies and parts and better, newer equipment...
Makes my life easier, gets more work done, and builds a type of equity which:
- Makes the co worth more should I decide to sell and / or...
- More important is supplies / equipment is better than cash in the bank because it can't be spent stupidly and the IRS is not that interested in it either... Plus, I can do my own maintenance and fix most anything myself.
- Very important, whatever I buy is deductible for several years as it loses value, and if / when I sell / dispose of something it is again deducted, so long I show a small profit from time to time life couldn't be better.
- Most important, allows me to stay operational through literally years of drought, I operate on fuel cost only during hard times, allowing me to survive on a gross income of $300-$400 / week almost indefinitely (a lesson learned a few times over, well, more than once...)

It does cost me a few % in property tax every year, but it's by far the cheapest way out.

[cl&l c.c. Tx]

As I read this post it really got me thinking, maybe this bussiness isn't such a good idea after all. With all the talk of steep taxes and numerous other expenses, and tons of competion is it really possible to make REAL money. I know a few other guys where I am from 2 run their bussinesses completely "under the table" and 1 is "legit" (insured, workmens comp etc.). All seem to be making about the same money but the "legit" guy works a hell of alot more than the other 2 guys who don't pay taxes just to take home the same amount of $$$. So here's my question for all you pros( the ones paying taxes, insurance and such). How exactly do you go about starting a "legit" business in a market thats highly competitive, or is it even possible without a ton of money to start with?

[PMLAWN]

As I read this post it really got me thinking, maybe this bussiness isn't such a good idea after all. With all the talk of steep taxes and numerous other expenses, and tons of competion is it really possible to make REAL money. I know a few other guys where I am from 2 run their bussinesses completely "under the table" and 1 is "legit" (insured, workmens comp etc.). All seem to be making about the same money but the "legit" guy works a hell of alot more than the other 2 guys who don't pay taxes just to take home the same amount of $$$. So here's my question for all you pros( the ones paying taxes, insurance and such). How exactly do you go about starting a "legit" business in a market thats highly competitive, or is it even possible without a ton of money to start with?
You are on the right track, Takes a while to build a business up to the point of doing right AND doing well:laugh:

As far as pay-- I am an S corp and pay myself a salarey plus $15 an hour if I work the field.

[noseha]

I Don't Think Any Of Us Start Ligit, We Either Pick It Up As A Second Job Or Work For Someone Else For A Few Years. Then Start Our Own Lawn Care And Then It Explodes Into Landscaping, Ferting, Irrigation, Or Something Like That. Sooner Or Later We All Find Our Niche. Most Of Us Live Dirt Poor Until We Get All Our Equipment That You Need Which Takes 6 Years And You Will Never Have All That You Want . We All Work Towards Becoming Legal And Ligit, It Should Take About 3-4 Years. Insurance Being The Most Important And First Thing. Your Customer List Dictates When You Make Your Moves. You Should Be A Single Operator For Your First 40 Accounts , Full Time Accounts. And Then You'll Need A Part Timer, And Then Just Keep Going. Use The 3rd Rule: 1/3 Taxes, 1/3 Business, 1/3 Yourself.i Bet 97% Of Us Have A Dual Income.

[Total.Lawn.Care]

I Don't Think Any Of Us Start Ligit, We Either Pick It Up As A Second Job Or Work For Someone Else For A Few Years. Then Start Our Own Lawn Care And Then It Explodes Into Landscaping, Ferting, Irrigation, Or Something Like That. Sooner Or Later We All Find Our Niche. Most Of Us Live Dirt Poor Until We Get All Our Equipment That You Need Which Takes 6 Years And You Will Never Have All That You Want . We All Work Towards Becoming Legal And Ligit, It Should Take About 3-4 Years. Insurance Being The Most Important And First Thing. Your Customer List Dictates When You Make Your Moves. You Should Be A Single Operator For Your First 40 Accounts , Full Time Accounts. And Then You'll Need A Part Timer, And Then Just Keep Going. Use The 3rd Rule: 1/3 Taxes, 1/3 Business, 1/3 Yourself.i Bet 97% Of Us Have A Dual Income.

I have to agree and disagree with this to some extent. Agree that most of us do not START LEGIT. However, I think that there are some (myself included) that may have cut a few yards in the first week or two of starting the business just to get the money to become Legal and Legit. I became legit in the first 3 weeks of operating. I started in July this year, and so far, other than buying gas and a few small expenses here and there (like $25 or less) my business cash or business line of credit has paid for everything. I started this with every intention of operating Legal and Legit. From the day I designed my first flier, I have had the intention of building this into my full time job and a multiple crew enterprise with many additional services (irrigation, landscape lighting, sod install, etc.). Yes, I like the extra money, but I saw the income potential of the Big Business off the start and that is where I am headed.

Now, to the original question:

"How do you Pay yourself!"

First, in any business you get paid last. You pay your expenses, pay for your equipment, pay your employees (if you have any) then you get paid. How you get paid is determined by how you are set up. If you are a sole proprietor like most of us here, then your business profits add to your job income (if you have one) and get taxed on your individual income taxes. You do not get to expense a salary or wage to yourself this way. So you can just take money from the business when you want it, need it, as long as the above conditions are met.

Once you incorporate, then you become an employee of your business (or you can) and you pay pay yourself a salary (less applicable taxes, that you need to submit to IRS and state, etc.). Your salary to yourself is expense deductible to the business and then becomes personal income for you. This is important because if you are incorporated, then you file a personal income tax return and your business files a corporate income tax return. There are pros and cons both ways, but that is another thread.

[loydm689]

what if you are in a partnership?

[Total.Lawn.Care]

what if you are in a partnership?

To be a true partnership, you have to have legal papers drawn up. Then, a partnership worsk just like a sole proprieter, your income is taxed on your personal tax return. So, you can just draw money out of the business when needed.

[ed2hess]

I am not the business guy for our lawn service but I know that in a corporation you can save a lot of tax money You pay yourself the minimum amount that you can live on each year. Then assuming the business shows a profit that money can be taken out with a minimal tax. I am pretty sure that you pay far less tax on the profit......ask your account how to set this up. I ran a small part time business for several years as Sole Proprietor and ended up paying way way too much tax....I was dumb.

[scott's turf]

Solo, 1k / month.

It's all I need, way I see things, here's the problem:
- Whatever I pay myself gets taxed heavy.
- After that, whatever is profit gets taxed even heavier.

So I spend my money on supplies and parts and better, newer equipment...
Makes my life easier, gets more work done, and builds a type of equity which:
- Makes the co worth more should I decide to sell and / or...
- More important is supplies / equipment is better than cash in the bank because it can't be spent stupidly and the IRS is not that interested in it either... Plus, I can do my own maintenance and fix most anything myself.
- Very important, whatever I buy is deductible for several years as it loses value, and if / when I sell / dispose of something it is again deducted, so long I show a small profit from time to time life couldn't be better.
- Most important, allows me to stay operational through literally years of drought, I operate on fuel cost only during hard times, allowing me to survive on a gross income of $300-$400 / week almost indefinitely (a lesson learned a few times over, well, more than once...)

It does cost me a few % in property tax every year, but it's by far the cheapest way out.

Man, I hope you are investing a lot of money back into your business if you are only paying yourself $12k/year!! That is far less than most employees will make.

[YardPro]

subchapter s and llc are the only corp types that you dan differ business losses to personal income.

corperate tax is much higher than personal income. Subchapter s allows you to build operating capitol without being taxed on the money. A simple way to view an S corp is that you only get taxed on the money you spend, not what comes in.

[Shorts]

Correct me if I am wrong here. Under an S Corp whatever money is in the account at the end of the year goes to the bottom line of your personal return??? This is what I have been told at least.

[Total.Lawn.Care]

Correct me if I am wrong here. Under an S Corp whatever money is in the account at the end of the year goes to the bottom line of your personal return??? This is what I have been told at least.

You are assuming that whatever cash is left in the business account is the "PRFOIT" after all expenses are paid. Your cash on hand and expenses are two different things. You can pay out cash (say $8000) for a new mower, but you depreciate it over time and expense a peice of it out each month for say 2-3 years. Items like this make your cash available and your profit (Bottom Line Income) different.

This is from the IRS Website on S Corp:

An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation. Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss.

If you are an S corporation use the information in the charts below to help you determine some of the forms that you may be required to file.

Essentially, if you are a shareholder of an S-Corp, then your income from the S-Corp is filed on your personal return just like it were income to you. If your business is an S-Corp, then it will file an 1120S Corporate Tax Return.

[PMLAWN]

Correct me if I am wrong here. Under an S Corp whatever money is in the account at the end of the year goes to the bottom line of your personal return??? This is what I have been told at least.
The only money that affects you personal taxes is what the corp pays out to you--The S corp is it's own tax body- If the left over money is paid out as dividends to you than you pay tax.

[Total.Lawn.Care]

The only money that affects you personal taxes is what the corp pays out to you--The S corp is it's own tax body- If the left over money is paid out as dividends to you than you pay tax.

Wrong again. The S-Corp passes its profit/loss tax liability to the members of the S-Corp (company owners). If you draw a salary from the S-Corp, or C-Corp, it is an expense to teh company and income to you, but either way, whatever the company shows as a profit for the year becomes your income as well and is reported on your IRS 1040 Form in your personal income tax return.

Click here : http://www.corporate.com/entity-comparison.jsp and you can see the simple difference between LLC, S-Corp and C-Corp. If you have any questions, please feel free to ask me. I am an accountant and can explain what these things mean.

[PMLAWN]

Wrong again. The S-Corp passes its profit/loss tax liability to the members of the S-Corp (company owners). If you draw a salary from the S-Corp, or C-Corp, it is an expense to teh company and income to you, but either way, whatever the company shows as a profit for the year becomes your income as well and is reported on your IRS 1040 Form in your personal income tax return.

Click here : http://www.corporate.com/entity-comparison.jsp and you can see the simple difference between LLC, S-Corp and C-Corp. If you have any questions, please feel free to ask me. I am an accountant and can explain what these things mean.
Yes --this is the reason my CPA wife handles this side of the business, I screwed up the "dividend" pay out part. You are right than it all does flow to you-- I will stick to the marketing side now:laugh:

[Total.Lawn.Care]

Yes --this is the reason my CPA wife handles this side of the business, I screwed up the "dividend" pay out part. You are right than it all does flow to you-- I will stick to the marketing side now:laugh:

Yeah, I am an accountant as well. I am going to incorporate to an LLC after th first of the year. I do not want to deal with the "Dividend" situation. My main purpose is to get the business finances and personal finances completed seperated. Good thing you have a CPA wife. My wife is an accoutant as well, but I will have to re-teach her later down the road so that she can take my books over when I get to busy...

[Proscapez LLC]

well for me I havent been paid in the last 2 years, I keep buying equipment.
My wife makes good money so we live off of it.
My plan is to just keep reinvesting into the LLC, when the pot starts building I just buy something else I can really use to make more money. I pay cash for all business related items, So I have no debts for equipment.

[fiveoboy01]

I don't pay myself a thing.

Right now, my full-time job pays enough to pay for the mortgate, truck payment and any other bills.

The money I make stays in the business account, and is used for business expenses only. OK OK, I did write myself a 50.00 check last week for dinner at a nice restaraunt. That probably comes out to .25/hour lol.

[PMLAWN]

I don't pay myself a thing.

Right now, my full-time job pays enough to pay for the mortgate, truck payment and any other bills.

The money I make stays in the business account, and is used for business expenses only. OK OK, I did write myself a 50.00 check last week for dinner at a nice restaraunt. That probably comes out to .25/hour lol.
$50.00--Wow--and they say there is no money in this business:laugh: :laugh:

[topsites]

"How do you Pay yourself!"

First, in any business you get paid last. You pay your expenses, pay for your equipment, pay your employees (if you have any) then you get paid.

Forget that nonsense of getting paid last, when you operate like that there are a lot of times when you never get paid, and once customers and employees see that, they will continue to take advantage of you (and worse yet, you are letting them do it).

Not to make you feel bad because I used to think like that, but today I get paid first and I always get paid.

I will grant you there is a fine line between the company's financial obligations and my pay, but the IRS sees me as an employee and since they want to play it like that, now so do I, and I am telling you that as the owner-operator, nowadays I always get paid, and first!

Because I got tired of it, I got tired of making sacrifices as I found out I was only hurting myself... Besides, I'm the main man, right? Right.

[Total.Lawn.Care]

Forget that nonsense of getting paid last, when you operate like that there are a lot of times when you never get paid, and once customers and employees see that, they will continue to take advantage of you (and worse yet, you are letting them do it).

Not to make you feel bad because I used to think like that, but today I get paid first and I always get paid.

I will grant you there is a fine line between the company's financial obligations and my pay, but the IRS sees me as an employee and since they want to play it like that, now so do I, and I am telling you that as the owner-operator, nowadays I always get paid, and first!

Because I got tired of it, I got tired of making sacrifices as I found out I was only hurting myself... Besides, I'm the main man, right? Right.

I agree that you should get paid and the way I see it, if you make all of your business obligations and then there is no money left to pay yourself, then there is something wrong. Either you are managing poorly (not saying that for anyone in particular), you are not collecting monies due, not charging enough or have non-productive employees. So, to say all of that, you have to stay on top of your business and run it and not let it run you. We all strive for the day that we can get all bills and employees paid, get all customer payments in and then look at the books and be proud of the money that we have made for ourselves. Then, the next month comes and we do it again...

[topsites]

Man, I hope you are investing a lot of money back into your business if you are only paying yourself $12k/year!! That is far less than most employees will make.

You got no idea as to all the stuff that's been purchased in the past 5 years lol.

A new mower (I have 2, but went through 2 more, so 4 total), 3 weedeaters (really 4 but one is kaput), 2 backpacks (really 3 but one got stolen), a walk behind core aerator, a big red rear-tine tiller, a 10hp pushblower, a spreader, a wheelbarrow, rakes and rakes and tarps (at least a dozen), a hedge trimmer, a chainsaw (really 2 but one lost compression), a power generator, a handheld blower, an air compressor, and an assortment of tools so complete even the most outfitted mechanics would be somewhat impressed.

2x 3-ton Floorjacks and one lightweight racing jack (for the truck, so it doesn't take up tons of space and waste fuel due to weight), an assortment of garbage cans so I only run to the dump once / year with trash, several hand grinders and 2 chainsaw sharpeners (I like having another brand new in the box in case one breaks years later, especially when I find them on sale), etc, etc, et.al.

30 blades, 100's of quarts of synth oil, at least 6 gallons of antifreeze, trans fluid, filters out the yinyang, boxes and boxes of assorted grommets and hair clips and cotter pins and E-clips and C-clips and hitch bushings and caster bushings and idler bushings and spindle bearings and wheel bearings and 100's of washers and deck knobs and blade bolts and blade nuts and and and... all those 100's and 1000's of little special pieces and parts that waste your time every time you need that stupid little special part you have to get in your car and drive to the nearest store for one little dollar thing (which, when bought in quantity, costs far less).

Don't forget tires (4 car, 4 more for the Wb), a tire changer (yes, I put on my own tires), WINDEX (gallons), dishwashing soap (also gallons), at least 3 handheld sprayers and a couple backpack sprayers, at least 8x 5-gallon cans (one diesel, one keros, the rest red / gas), air hose and all the quick-connect fittings oh and water hose (100's of feet) also all quick-connect, 100's of feet of extension cords, tow rope, come-along, shears, lopers, chain cutters, several sets of jumper cables, 1000's of fuses and 12v light bulbs, etc, etc, et.al...

I even have industrial racks (like those things you see in convenience and grocery stores where they put stuff for sale) to store the stuff on, all organized (well, kinda, mostly). Oh yes, a case of stihl 2-cycle oil, another case of grease tubes for the lube guns and several of those, an air-driven and an electric lube gun as well, a rechargeable flashlight, jackstands, yard and farm sprinklers (yup, just in case), I even got a few 100 pounds of grass seed thou that was more of a mistake than anything else lol.

In short, I can literally operate for years on just fuel. Yeah, because I done been through a couple of droughts and some hard times and I done learned my lesson, if you have nothing to fall back on during hard times then everybody and their customer's brother rapes you during those times they all take advantage of you when you get desperate, and I made up my mind: Never again, not me.


......I'll get a raise soon, but I want a compact tractor with a loader and a backhoe and a rough cutter for attachments bad, and a Z would be nice, sigh..
Oh, I forgot to mention I have an edger as well.

[fiveoboy01]

$50.00--Wow--and they say there is no money in this business:laugh: :laugh:

I'm starting to wonder!

But I make over $20/hr at my full time job, so I am just stockpiling the money I bring in right now. IF I get some accounts to justify buying a ZTR next season, then I will have enough to easily pay for half of one up front.

[LONEMAN]

I Don't Think Any Of Us Start Ligit, We Either Pick It Up As A Second Job Or Work For Someone Else For A Few Years. Then Start Our Own Lawn Care And Then It Explodes Into Landscaping, Ferting, Irrigation, Or Something Like That. Sooner Or Later We All Find Our Niche. Most Of Us Live Dirt Poor Until We Get All Our Equipment That You Need Which Takes 6 Years And You Will Never Have All That You Want . We All Work Towards Becoming Legal And Ligit, It Should Take About 3-4 Years. Insurance Being The Most Important And First Thing. Your Customer List Dictates When You Make Your Moves. You Should Be A Single Operator For Your First 40 Accounts , Full Time Accounts. And Then You'll Need A Part Timer, And Then Just Keep Going. Use The 3rd Rule: 1/3 Taxes, 1/3 Business, 1/3 Yourself.i Bet 97% Of Us Have A Dual Income.

You know you don't have to capitalize every word that you write?

[LONEMAN]

Click here : http://www.corporate.com/entity-comparison.jsp and you can see the simple difference between LLC, S-Corp and C-Corp.

Thanx Total.Lawn.Care for providing all of us with a wealth of information with that link!