Paying yourself

Discussion in 'Starting a Lawn Care Business' started by Big C, Feb 9, 2008.

  1. Big C

    Big C LawnSite Bronze Member
    Posts: 1,641

    For solo guys out there....what formula do you use to pay yourselves as an employee of your own business? do you use an hourly rate, percentage or flat rate? I need to know this so that I don't make the mistake of paying myself too much and depriving my business or pay myself too little and feel like I am working for nothing...any insight would be helpful
  2. jdmcat

    jdmcat LawnSite Senior Member
    from Idaho
    Posts: 439

    here's what i was told...

    open a separate checking account for your business. all money that comes in or goes out of the business should go into/come from it. when you get paid for a job, take 25% off the top for taxes and put that in a separate savings account so you can afford to pay your taxes at the end of the year. then when you need money, you write a check to yourself (called a draw) from the checking account.

    i'm won't be giving myself a regular paycheck. instead, when i need to go grocery shopping or pay the power bill i just write myself a check for the amount i need and pay it.

    then when tax time comes around you just bring your checkbook register to your accountant. i will do it this way at least for a while until i can get it down to a science.

    disclaimer: i'm just starting out myself, this is just what my cpa told me, so take it for what it's worth. somebody else who has been doing it for a while might have better advice.
  3. DuraCutter

    DuraCutter LawnSite Senior Member
    Posts: 806

    It depends how you're setup. If you have a corporation like we have, it's best to pay yourself a salary, pay the taxes and all right there, and then if you have some leftover profits at certain times as you check with your accountant, give yourself a shareholders loan.

    Good idea of thinking of paying yourself as it's amazing how most people forget that part or don't plan properly and the business suffers.

    Good luck

  4. IMAGE

    IMAGE LawnSite Bronze Member
    from midwest
    Posts: 1,134

    I am set up as an LLC, and I will be paying myself a meger flat rate for the next 2 yrs. It is just enough to survive. I have a planned 50% increase in wage for the 3rd yr, which will still have me living tight, but managable. I am basically going on the premise that I want the business to keep as much as it possibly can the first couple years so it can buy more equipment and shop space as it expands. Well the powerball is on now, maybe I will win... nope didnt win.
  5. landscaper22

    landscaper22 LawnSite Senior Member
    Posts: 829

    Like Duracutter said, it is all in how you are set up. Most likely if you are solo you will not have to worry about incorporating for awhile. So you really don't have to pay yourself a salary. Your personal taxable income will be what ever amount is left after you pay all of your expenses.
    I also have a business checking account (great idea to open up one). Most checks get deposited into it. Some customers make checks out to me instead of the business. I still report them as business income, but I may deposit them into my personal account. It just keeps me from having to write myself so many checks out of the business account. But, if I need more in my personal account I will transfer it from my business account. That is all you need to do.
  6. DFLS

    DFLS LawnSite Senior Member
    Posts: 354

    I am an LLC , at the end of the year my CPA does a schedule c for the business and makes it so the business breaks even. The net profit after all expenses is reported as payment to a subcontractor (me) on a separate schedule c. He maxes out my retirement account contribution and I take money out of the business by check as I need it.
    At least that's how I think it works.[​IMG]
  7. Wilson Edge

    Wilson Edge LawnSite Member
    Posts: 77

    Im glad someone put this thread up because i was wondering myself...having said that.
    In the past i have done terrible...ive paid for the expenses as i went and paid my employee but then all that was left i just spent. It hurt my business allot because I didnt use the money for better equipment and things like advertising. This year I set up with an accountant who will manage it for me. She works out the pay roll and all the recieving and expenses. And then i will also be paid an hourly wage...We will see how it goes for the first month and i might give myself a raise if it goes a little too well....but the main thing is to make sure your business is growing...if its not growing its failing.
  8. enviouslawns

    enviouslawns LawnSite Member
    Posts: 188

    I met with my cpa and was told take a certain amount every week and profits on the first of the month once all the bills are paid. so in my case ill take $750.00 per week during lawn season plus profit the first of the month, and then winter time plowing money is all gravy. it all depends on how much you have coming in to tho. Im only 20 and this is my 2nd year so u may take more or less depends. jmo
  9. Big C

    Big C LawnSite Bronze Member
    Posts: 1,641

    I am solo, I have a "regular job" that pays all my bills and then some. My lawn business is a "side job" for additional income....I don't plan on having any employees and will stay within the 20-25 acct range for the next few years at it a wise move to put 50% of my monthly income back into the biz and the other 50% to me as payment.
  10. bohiaa

    bohiaa LawnSite Fanatic
    Posts: 5,220

    yea, as an INC, Ot LLC, you can find yourself misapproating funds,,,,
    or in other words stealing....

    just with a DBA, it's hard to keep up with everything, like do you pay yourself while on this web site?
    do you pay yourself when you go do 1 bid?

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