How should I pay myself?

Discussion in 'Business Operations' started by tlipari, May 3, 2007.

  1. tlipari

    tlipari LawnSite Member
    Posts: 13

    I know this may sound dumb, but what's the best way to pay myself? I've had those tell me to cut myself a paycheck every week but how should I work that with taxes? If I cut myself a check do I deduct the taxes like I do my employees? Do I just go off what I paid in taxes last year and make sure at least that amount is set aside? I have a call in to a CPA....just curious how all of you handled that when you first started up?
     
  2. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    Everyone does it different, but afaik there are 2 basic methods:

    1) Treat yourself as an employee and pay yourself a salary (trust me it's way easier than hourly to track), do a slew of never ending tax paperwork and save about 1-2g / year or so. This method roughly adds out to 'Gross - (expenses + labor) = net profit' (and you have to pay taxes on the profit but in this scenario, $100 is a profit).
    2) Do it the gross - expenses = profit way, pay the taxes on the profit and the rest is yours to do with as you please, thou in this case you'll want to show a profit somewhere in excess of 10,000 / year before too long (at least into your 2nd-3rd year) and you'll spend around 3-4g / year on taxes, maybe more.

    One way involves a ton more paperwork, the other costs more money.
     
  3. gene gls

    gene gls LawnSite Gold Member
    Posts: 3,213

    Get a CPA. Discuess your business pratices with him and he will point you in the right direction as to what and how you need to do things.
     
  4. Nathan Robinson

    Nathan Robinson LawnSite Senior Member
    from 47712
    Posts: 317

    I tried sending you a personal message but it didnt give me that option when I clicked on your profile. Message me and I will show you how I set paying myself up. Nathan
     
  5. tlipari

    tlipari LawnSite Member
    Posts: 13

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