The simplest way to start a business is one where you and the company are one and the same. This is called a “sole proprietorship”, and it makes getting paid very easy, as long as you follow a few simple steps.
How do I pay myself as a proprietorship?
Now, for the good part – getting paid!
The first recommendation is that you set up a business bank account, so that you can keep your business and personal transactions separate. If you aren’t using a different name for your business, you can open up a business account in your own name. If you want to use a different business name, you’ll need to register it at the Department of Registrar of Companies.
Put all checks, sales, and all income from the business directly into that business account first. It’s best practise to have a dedicated debit card that’s just for the business, so that you can pay all business expenses directly and have them in one place.
Once your accounts are set up and running, all you really need to do to get paid is transfer money from your business account to your personal account. Instead of receiving a salary, this is called “a draw”. You effectively write a check to yourself. You can do that by writing a check, sending a transfer, or making a direct deposit.
Next, track it. If you’re using accounting software, you can mark transactions to yourself as an “owner’s equity” or “disbursement” (more on that later).
How much do I pay myself?
To know how much you should be paid, you’ll need to calculate how much profit your business expects to make, and then how often you should draw a paycheck from the business.
If you’ve already set up a business bank account and card, then it’s easy to log in to your accounting software (going through your bank is possible), to calculate the net of your sales minus your expenses. Once you know what’s left, you can calculate how much to pay yourself.
In terms of how often you do so, once a month is the most common. When calculating the value and the frequency of your pay, consider your personal goals and your lifestyle. Some people prefer contributing to savings, while others focus on traveling or time with friends and family as a priority.
At the start, you could pay yourself the bare minimum, so that your business can break even as soon as possible (considering the costs associated with starting a new business). Once you’ve broken even, you can start to increasingly pay yourself what you are worth.
If you find that business is doing really well, you can give yourself a bonus every quarter, or even increase your salary. Just make sure you’re keeping track of your expenses.
How to keep track of your finances
While a sole proprietorship is the simplest business structure, you’ll still want to make managing your books as easy as possible with invoicing software like SalesGURU.
SalesGURU can help you easily keep track of your sales and expenses. Also, you can categorize payments to yourself as “owner’s equity” or “disbursements” so that you know exactly how much you are paid each year.
Invoicing software lets you easily calculate how much to pay yourself, and how much you owe in taxes. Software like SalesGURU lets you manage your income and expenses, and keeps things simple. You should have everything about the health and success of your business right at your fingertips, so you can stay focused on running the company and living your life.