Page 14 - THE NOTICEBOARD EDITION 62 SEPTEMBER 2020
P. 14
Page 14 September, 2020
How to Pay Yourself as a Sole Proprietor
Continue on pg 13
so that you can pay all to pay yourself.
business expenses directly In terms of how often you do
and have them in one place. so, every two weeks or once a
Once your accounts are set month is the most common.
up and running, all you really When calculating the value and
need to do to get paid is the frequency of your pay,
transfer money from your consider your personal goals
business account to your and your lifestyle. Some people
personal account. Instead prefer contributing on savings,
of receiving a salary, this is while others focus on setting aside some money
called "a draw". You travelling or time with friends for tax purposes.
effectively write a check and family as priority.
to yourself. You can do that At the start, you could pay What does this mean for
by writing a check, sending yourself the bare minimum, so taxes?
a transfer, or making a that your business can break Filing taxes as a sole
direct deposit. even as soon as possible proprietor is simple. As a
Next, track it. If you're (considering the costs sole proprietor you must
using accounting software, associated with starting a new report all business income
you can mark transactions business). Once you've broken or losses on your personal
to yourself as an "owner's even, you can start to income tax return; the
equity" or "disbursement". increasingly pay yourself what business itself is not taxed
How much do I pay myself? you are worth. separately. (The IRS calls
To know how much you If you find that business is t h i s " p a s s - t h r o u g h "
should be paid, you'll need doing really well, you can give taxation, because business
to calculate how much yourself a bonus every quarter, profits pass through the
profit your business or even increase your salary. business to be taxed on
expects to make, and then Just make sure you're keeping your personal tax return.)
how often you should draw track of your expenses and Here's a brief overview of
a paycheck from the how to file and pay taxes as
business. a sole proprietor -- and an
If you've already set up a explanation of when
business bank account and incorporating your business
card, then it's easy to log in can save you tax dollars.
t o y o u r a c c o u n t i n g
software (going through Filing a Tax Return
your bank is possible), to The main difference
calculate the net of your between reporting income
sales minus your expenses. f r o m y o u r s o l e
Once you know what's left, p r o p r i e t o r s h i p a n d
you can calculate how much reporting wages from a job
Continue on pg 15
