How do you pay yourself?

Discussion in 'Starting a Lawn Care Business' started by Shorts, Sep 20, 2006.

  1. Shorts

    Shorts LawnSite Member
    Messages: 16

    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:
  2. guven

    guven LawnSite Member
    Messages: 205

    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,
  3. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    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.
  4. cl&l c.c. Tx

    cl&l c.c. Tx LawnSite Member
    Messages: 59

    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 LawnSite Gold Member
    Messages: 3,534

    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.
  6. noseha

    noseha LawnSite Senior Member
    from MI
    Messages: 554

    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.
  7. Total.Lawn.Care

    Total.Lawn.Care LawnSite Senior Member
    Messages: 840

    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.
  8. loydm689

    loydm689 LawnSite Member
    Messages: 3

    what if you are in a partnership?
  9. Total.Lawn.Care

    Total.Lawn.Care LawnSite Senior Member
    Messages: 840

    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.
  10. ed2hess

    ed2hess LawnSite Fanatic
    Messages: 14,369

    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.

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