Your business may be driven by your passion.
But passion don’t pay the bills.
Let me tell you why you need to put yourself on payroll ASAP.
Let’s start. I know for a fact you work overtime. You’ve probably experienced more than enough eye-strain working on your laptop during ungodly hours. It’s natural for business owners to put in a little more time, stay a little bit longer, losing sleep…
And there have probably been many, many times where you skipped a paycheck or two. Or 12.
You aren’t alone. According to Square, 38% of business owners don’t take a salary.
Here’s why that’s a major problem.
Business owners are no strangers to the ins and out of investing. We’re taking huge risks every day the second we decided to venture out on our own.
But we forget one simple thing. You are your biggest investment.
Your creativity, intellect, resilience, and patience doesn’t come cheap. It’s time to pay up and start recognizing your worth. Paying yourself shows that you’re committed.
It will also look good to future investors, banks, and other financial institutions, which will really come in handy when you’re ready to expand. And I would be remiss not to mention the tax benefits…
- Forming a legal S-corp or C-corp enables your salary and portion of FICA tax to be tax-deductible.
- For C-Corps, business profits that aren’t paid out as salary will be taxed at the corporate flat rate of 21% (which tends to be lower than personal tax rates)
- As a general rule of thumb – once your business consistently starts profiting $40,000 a year, or $3,333 a month, you could be leaving money on the table if you are not paying yourself through payroll
But please don’t just take my word for it. Please consult an accountant or financial advisor for making the big plunge as there are certain factors to consider that are specific to your case.
To more money in our pockets,
Chika
P.S. So often, business owners are looking for a CPA to simply ask a few questions or pick their brain to make sure they are going about business the right way. Does this sound like you? I’m in the process of rolling out 1:1 Strategy Zoom sessions that you can book with me and get all your questions answered. If this is something you may be interested in, click here. I’ll make sure you are the first to know!
