How much do you pay yourself?

Discussion in 'Business Operations' started by JFGLN, Nov 12, 2006.

  1. JFGLN

    JFGLN LawnSite Bronze Member
    Messages: 1,023

    This question is mostly directed at LCO's set up as S Corps. My partner and I are considered to be employees of the corp, so we draw a monthly salary. Money left over after all expenses and payroll, (profit) is paid out to the parters at the end of the year.

    So my question is, What is a reasonable salary to pay yourself?
  2. Az Gardener

    Az Gardener LawnSite Gold Member
    Messages: 3,899

    According to IRS rules you are supposed to pay yourself what you would make doing the same job as an employee for another company. Taking into consideration your market and number of employees etc. That is what my tax guy has advised me. It will be different from one region and company size to another.
  3. YardPro

    YardPro LawnSite Gold Member
    Messages: 3,570

    as much as the business can afford.
  4. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    I got tired of the salary routine this year.

    That would be Gross - (overhead + cost + salary) = profit
    Always the quarterly 941's and state and futa and social security payments =
    4 envelopes + 4 checks + 4 forms (4 charts with percents to figure) and make sure you get the correct check + form in each envelope or you WILL end up owing one department money while another one will have this credit (yes they WILL cash your check regardless of what dep't you sent it to) and you get letters over missing paperwork and wrong paperwork, and do this every quarter, do NOT make a mistake.
    Of course, you can show as little as $100 profit for the year and the IRS will bother you little.

    Now I do gross - expenses = profit.
    Quarterly 1040ES + 740ES, 2 checks, 2 envelopes.
    Two charts to figure % (saves calculator wear lol).

    It's more taxes the second method (profit taxes are higher than salary by a thousand or more / year) but no more constant headaches, what is left after paying taxes (the profit) is mine to do with as I wish so I can buy equipment or a new car but really I have to pay myself... Anyway, social sec. gets paid automatically and no FUTA. But, you need to show thousands in profit (10k+), at least as much as you made before via the other method.

    Because it's CHEAPER to cut grass than do taxes!

    Oh yes, that would be an LLC registered as a sole proprietorship.
  5. JFGLN

    JFGLN LawnSite Bronze Member
    Messages: 1,023

    This is our first year set up as an S corp. We already had a bookkeeper that did our invoicing, state taxes and payroll, so it isn't that much more work for her to keep track of the federal taxes.
  6. SodKing

    SodKing LawnSite Bronze Member
    Messages: 1,641

    two words...payroll service.
  7. crab

    crab LawnSite Senior Member
    Messages: 633

    id say $ 20000 a month is a good base figure!
  8. Josh.S

    Josh.S LawnSite Bronze Member
    Messages: 1,085

    $200 per/week all year around... but all of that income is disposable... I just choose to pay myself little to put more into the business..
  9. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    Yeah, for starters.
  10. JFGLN

    JFGLN LawnSite Bronze Member
    Messages: 1,023

    Hmmm, 20,000 a month? That would be a lot of lawn mowing!

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