Hey you! Thank you for being apart of our blog reading today. Welcome to another read on The Keys. It’s your favorite Money Motivator – Growth Instigator, Erica Fields bringing you the keys to your financial house!!
I’ve had so many amazing opportunities in this journey with Providence and I wanted to bring a topic to point in this read that affects all of us as small business owners, especially those of us just starting out. An important factor for business owners when it becomes your only source of income is paying yourself. New business owners often start something new with little to no help and somehow forget to lay a foundation to pay themselves.
The Wrong Methods
Now some of you will say “I do pay myself” because your business proceeds provide you with a great means of financial support for your personal needs. Some of these methods are direct debits to the business account but that opens a whole can of worms for multiple reasons and I’ll be sure to address these on future blogs. Others will use the ATM to withdraw cash or online banking to transfer funds. Some even go as far to write themselves a check on the business account to acknowledge the business expense as “payroll”.
Properly Paying Yourself
Most of us starting out have no earthly idea of how much it costs in taxes to own in business. We cross our figures and clutch our pearls at the results of tax season when time to file. The only way to avoid these pains is to employ a full-service solution.
First, we must understand how much we can afford to pay ourselves. This number is confirmed with proper bookkeeping that is current and up to date. Then from the remaining funds, a business owner can then elect to pay themselves. But you must also consider tax liability and other possible costs related to payroll, such as medical premiums. Your full-service provider can give you a solution to not only pay yourself, but you will be able to proactive stay current with payroll taxes and other garnishments.
It’s very understandable that starting out it could be difficult to employ business solutions. But know that if you find yourself with year-end tax bill higher than $1,000 and your sales are increasing, you’ll want to at least consult with a professional service provider to ensure you are paying an adequate amount in taxes and on a compliant schedule. The professional fees are tax deductible and will save you and your business money in the end.