Salary for Small Business Owners: How to Pay Yourself & Which Method (Owner's Draw vs. Salary)?

Рет қаралды 185,005

Күн бұрын

What is the best salary for small business owners? And what is the best method to pay yourself?
Become a Tax Client: mycpacoach.com/tax-planning-s...
Today I am going to show you how I pay myself in businesses I own, and give you my opinion, as a CPA, on how to pay yourself in your own business.
I cover the different considerations on your business type (LLC, Corporation, etc.) and how that plays a role in how you receive compensation from your business.
I also covert the different types of owner compensation, such as owner draws, dividends, and salary wages.
By the end of this video, I promise you that you will be equipped with the fundamentals to start paying yourself correctly for your business.
Outline:
Intro: (0:00)
Risks of Overpaying Yourself: (2:10)
How Much to Pay Yourself: (3:55)
Best Methods to Pay Yourself: (5:05)
Recap - Salary for Small Business Owners: (9:52)
Interested in talking with someone from our team? Sign up to get notified when we are accepting new clients here: lyfeaccounting.com/coming-soon/
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Disclaimer: The information provided in this video is for informational purposes only and is not meant to take the place of professional legal, accounting, or financial advice. If you have any legal questions about this video or the subjects discussed, or any other legal matter, you should consult with an attorney or tax professional in your jurisdiction (i.e. where you live).

Пікірлер: 188

@virgatronbooks 3 жыл бұрын

Thank you for a professional way of how to pay yourself because these videos on KZfaq 🥴Chile don’t break down nothing. Thanks for the content

@LYFEAccounting 3 жыл бұрын

I appreciate that

@kaseyawilson 2 ай бұрын

Where has this channel been all of my life? Just started my LLC a week ago and learning.

@holleelifestyles2844 3 жыл бұрын

I just love how clear and concise you are. The graphics make it fun and easy to follow for beginners. Thanks so much! 😄💫

@LYFEAccounting 3 жыл бұрын

You are so welcome!

@creatorbrain 2 жыл бұрын

Man, the amount of value you put in these videos is amazing. Thank you!

@Carleen02 3 жыл бұрын

I'm learning about stating my own business. This has helped me alot. Thank you, so much.

@byuannicaro1775 3 жыл бұрын

Great content and perfect execution!

@leomalinda2467 11 ай бұрын

So much value from this video brah. Much appreciated!!!

@corneliushenderson1679 2 жыл бұрын

This is great information! I did not even consider an emergency fund for my business. And preparing to pay someone a salary who will take over managing the business if I choose that route. Great food for thought!

@Waynaworld 2 жыл бұрын

Great Video!! Thanks!

@alexgarcia1826 3 жыл бұрын

Love this video man! Short, Simple, and to the point!

@LYFEAccounting 3 жыл бұрын

Appreciate it!

@dylancrocker633 2 жыл бұрын

Very polished video. Clear and concise.

@shaywatts6338 2 жыл бұрын

This was so helpful & easy to understand!

@chrisvillanueva8855 3 жыл бұрын

Man, you deserve a Pulitzer for being able to describe this stuff in very easy to understand terms. I've never seen it done so well even after speaking with many experts in this field. Great work.

@SmarterByNatureTV 3 жыл бұрын

This is really helpful information! We are a new small business and navigating the tax world is quite daunting 0_o. Great content! Thank you for sharing!

@derrekord 2 жыл бұрын

This was perfect. Thanks :)

@thestandberrys2519 3 жыл бұрын

Now this makes alot of sense!

@LYFEAccounting 3 жыл бұрын

You're welcome!

@camwil1934 3 жыл бұрын

Learning so much from your videos. Just started, this is my second video, can't wait to get to the rest.

@LYFEAccounting 3 жыл бұрын

Awesome! Thank you, you got this!

@davidweeks8131 3 жыл бұрын

Sherman, great concise info. I’ve subscribed and looking forward to this content. Will definitely look at your website and check out your services based on how transparent this video was and anecdotal cases you’ve put in. I can’t tell you how many videos I’ve watched on this same topic but still was left with questions. Your gonna kill it man. Keep up the awesome work!

@LYFEAccounting 3 жыл бұрын

Thanks so much for the thoughtful feedback David, means alot

@debrahuynh4574 2 жыл бұрын

Thank you for the valuable info 🙏🙏🙏

@B.O.S.S.MR954 3 жыл бұрын

love the videos appreciate the knowledge just started my 2nd business cant say how much your videos have helped salute

@LYFEAccounting 3 жыл бұрын

I appreciate that!

@darriusvuitton2827 3 жыл бұрын

Nice work explaining in detailed information thank you for the summary! 🙃

@LYFEAccounting 3 жыл бұрын

Our pleasure, Darrius!

@outsmartbigbrother 3 жыл бұрын

Excellent video!

@troykjohnson03 Жыл бұрын

Useful info definitely, thanks

@lcmlcm2460 3 жыл бұрын

First video of yours that I watched. Very informative and clear, helpful THANK YOU I subscribed

@LYFEAccounting 3 жыл бұрын

Welcome aboard!

@ericburns3563 4 күн бұрын

This video is something to check out for sure before starting your business and also if you already started watch it because it could save a headache down the line. Thank you Lyfe accounting I’ll make sure to tell people about this one

@MultiDirtyone 3 жыл бұрын

Great information. Easy to understand and apply. I was confused about how to pay myself by making a "draw" but you've helped me a lot. Thanks.

@LYFEAccounting 3 жыл бұрын

You're very welcome!

@betterself679 Ай бұрын

Great Vid.

@inalienablerights 2 жыл бұрын

Your information is so invaluable. I let the commercials play all the way through including liking and subscribing.

@LYFEAccounting 2 жыл бұрын

Wow, thank you!

@lassiterleon737 3 жыл бұрын

Very beautifully put my bro, first day at my new store, first business, and had no idea how to pay myself. Now, I feel like an expert

@LYFEAccounting 3 жыл бұрын

Keep it up! So glad to hear that and get this feedback

@sluiceboyprospecting 3 жыл бұрын

Awesome video bro! Helped a lot.

@LYFEAccounting 3 жыл бұрын

Glad to hear it!

@Harold_Blackwell 3 жыл бұрын

This was gold! Gained a new subscriber.

@LYFEAccounting 3 жыл бұрын

Thanks for subbing

@andreacarter2108 2 жыл бұрын

Great Knowledge! Thank you again! 👍

@LYFEAccounting 2 жыл бұрын

Thanks Andrea!

@sneediewonderproductions 2 жыл бұрын

Great info!

@janicelau521 2 жыл бұрын

Super helpful video, thank you!

@LYFEAccounting 2 жыл бұрын

Glad it was helpful!

@mauricetteterry8681 3 жыл бұрын

Thank you, this Video was so helpful! 🙏🏽

@LYFEAccounting 3 жыл бұрын

Glad it helped, thank you!

@victorramirez7343 2 жыл бұрын

What kind of business do you run ?

@HEADLESSPRODUCTIONZS Жыл бұрын

Thank you for this video

@maryk9104 2 жыл бұрын

I am so happy that I found this channel. You and your team does such a decent job. It’s helpful for any regular taxpayer. Also, I am taking Individual income taxes class and all your videos helps me to understand the class better. Thanks a lot 🙏

@LYFEAccounting 2 жыл бұрын

Thanks, Mary. We’re happy we found you! My individual tax class was soooo confusing lol. Hopefully our videos simplifies taxation for you.

@maryk9104 2 жыл бұрын

@@LYFEAccountingthank you again veryyyyyy much🙏🙏🙏🙏🙏🙏

@youtubeonly1557 2 жыл бұрын

Great thorough content! Only thing I feel everyone forgets to put in these videos is actually HOW to pay yourself as a W2. Who do you go to, can you do it in your own etc etc.

@LYFEAccounting 2 жыл бұрын

Great question. You can use a payroll provider such as Quickbooks payroll that will do this for you automatically.

@darviswhitehead8870 2 жыл бұрын

Just getting my business started I’m coming to join your team Asap 😃💯💯🤘🏾

@munirahg9471 2 жыл бұрын

Excellent Video!

@LYFEAccounting 2 жыл бұрын

Thanks Munirah!

@patricialewis4239 3 жыл бұрын

Thank you very helpful I appreciate it

@LYFEAccounting 3 жыл бұрын

Glad it helped, we appreciate your view. =)

@dmarkcooper 3 жыл бұрын

"Any value at all?" I like and appreciate your humble nature.

@LYFEAccounting 3 жыл бұрын

@glendineevans1467 3 жыл бұрын

These videos provide lots of value. Thank you!

@LYFEAccounting 3 жыл бұрын

@@glendineevans1467 :)

@outdoorswithhamp4645 3 жыл бұрын

Thanks for your very informative videos. Just started a Auto paint and body business with my brother. Your videos helped tremendously with some decisions we had to make as far as our filing status. We set up as a LLC but I was sure when we had to choose a filing status. Now I can make that decision and not worry if I am making the right decision. Thanks again

@LYFEAccounting 3 жыл бұрын

Thanks for sharing, I’m glad that this video helps you and wish you the very best in your business

@victorramirez7343 2 жыл бұрын

Great I commend you on the auto body shop that’s a very essential business wish you the best of luck in it and also felt the need to inform you of my ability as a financial consultant to help auto body shops obtain funding to the tune of a million dollars no credit check in as little as 48 hours if your interested feel free to reply

@467inc 2 жыл бұрын

you made things very simple keep doing this

@LYFEAccounting 2 жыл бұрын

Will do! Thanks for supporting the channel.

@tiffanytyler7128 2 жыл бұрын

I just found this channel and I’m so glad I did. It confirms a lot of things I already thought. Can you do a video on how to handle child support as a sole prop, LLC or scorp? Thanks in advance.

@cobracogwell_ 3 жыл бұрын

This was great information, thank you for taking the time and explaining it in detail. I have a holding company that owns a operating company. I'm not sure if I should pay myself through the operating or move the revenue up and pay through my holding.

@savinesequoia3805 Жыл бұрын

I litterly watched another video that oddly sounded the same with the info, I see your video skills.. very smart..

@louisnforna8101 3 жыл бұрын

Thanks for the video. I am about setting up a business and the issues touched will help me. What i have learned in summary: -budget for operating expenses and make provision for R&D. -make a balance between taxes and business continuity in terms of salary vs dividends

@LYFEAccounting 3 жыл бұрын

You're already ahead of the game!

@enjolique367 2 жыл бұрын

Great video

@Mosdefinitelyable 2 жыл бұрын

Thanks so much!!!!!

@orlandoevans8620 3 жыл бұрын

Great information thanks

@LYFEAccounting 3 жыл бұрын

Glad it was helpful!

@sharleen006 3 жыл бұрын

wow great video bro

@LYFEAccounting 3 жыл бұрын

Thank you, Sharleen!

@toussaintlouverture9260 2 жыл бұрын

Very dope information brother...will be in contact real soon!! Ty kindly

@LYFEAccounting 2 жыл бұрын

Thanks for watching!

@DARLEE_ Жыл бұрын

Great Video hoping to be a great accounting

@robbyyn Ай бұрын

Thank you for this very helpful information! I was kind of thrown into a small biz and never understood how to pay myself. I def don’t have the 3 months expenses saved! That number seems so daunting! As simplistic as you put this video and how nice the points are, would you mind doing a very BASIC video about this for those who need a more vanilla explanation? Thank you!

@terrydoss6343 3 жыл бұрын

Another informative video I need all the help there is I’m not understanding everything said in your video but would to know more

@LYFEAccounting 3 жыл бұрын

Thanks for watching, glad you enjoyed it

@AshtonSnapp 3 жыл бұрын

The way I always thought about it: pay myself just enough to pay my bills and get groceries, plus a little bit so I can save up.

@LYFEAccounting 3 жыл бұрын

Good, but make sure you watch our video on estimated tax penalties because if you don't make payments then you could lose between 3-5% of your income.

@JuiceRoberson-vn1de 8 күн бұрын

My teacher justtttt told me this & I’m about to do EXACTLY this. Number give me such anxiety & a headache but I’ll rather do it now then later.

@xaviersantaclara1783 4 ай бұрын

I didn't understand a darn thing. You are too smart for me, man. but I will definitely rewind this video over and over until I gets you. Thank you!

@CrispyBroccoli 4 ай бұрын

😂 thought I was the only one

@deedeescarberry5981 2 жыл бұрын

Do you have any videos (or could you make one) where you walk through step by step the numbers and how a real life business owner would calculate from that? For example if they earned $1000 in a month, spent x amount of dollars in expenses that month … how to calculate from there how much to set aside for taxes, how to calculate how much to save for 3 months of expenses (that could be different in future months), and how much the owner would be paid? I think seeing real numbers would be so helpful to me! Your videos have already been more informative than any I’ve found for paying myself as a sole proprietor, I just would love to see a concrete example to better understand! Thank you!

@EverythingAJA 3 жыл бұрын

New subscriber to both your channels! I love your editing. Thanks for this!

@iCoily 2 жыл бұрын

I purposefully scrolled down to find a Black person speaking on this topic. Love it! Thank you for this. I will definitely be watching more of your content!

@LYFEAccounting 2 жыл бұрын

We appreciate you!

@susieblanco2722 3 жыл бұрын

Good info

@LYFEAccounting 3 жыл бұрын

Glad it was helpful!

@arnoldtarbooz1420 2 жыл бұрын

Again - this was great and awesome. What if You have an LLC and have paid yourself via W-2 for the past 7 months? Does it matter? This scenario is a mix of S-corporation and LLC. Thanks in advance for the answer on this.

@keezytv7854 3 жыл бұрын

this is a good video

@LYFEAccounting 3 жыл бұрын

Thanks for watching :)

@hernanibarsmombelli3924 3 жыл бұрын

Thank you.

@LYFEAccounting 3 жыл бұрын

Welcome!

@jesangsharon8150 3 жыл бұрын

Thanks 😊

@LYFEAccounting 3 жыл бұрын

No problem 😊

@2.125Official 2 жыл бұрын

thank you

@user-rg6ly3wy5y 10 ай бұрын

This video was very timely. We have have a single-LLC and the owner has been paying himself as a w2 employee. None of the professionals we have worked with ever mentioned or explained things to us in these 3+ years as you have done in under 15min. Thank you

@jjna8844 2 жыл бұрын

Thanks

@dmarkcooper 3 жыл бұрын

You rocked it in this video. Take Aways: 1. 3-months of Op Exps, 2. $ set aside for Stet Goals, 3. Then PAY yourself. DONE!!

@LYFEAccounting 3 жыл бұрын

Thank you, Mark!

@revel9551 Жыл бұрын

Very nice and helpful video!Just to be be clear. When deciding to pay myself must it be after the whole year is done if I choose to get what's left of the money once all expenses are cleared?

@lenzocanty4125 3 жыл бұрын

Great advice !!! Lenzo Canty CPA

@LYFEAccounting 3 жыл бұрын

That means a lot coming from another CPA

@anju2606 3 жыл бұрын

I think what I was looking for is a percentage. If I gross 1 million/year and have 10% profit as a restaurant = 100k profit per year - what percentage of that can be paid to ownership. Keeping in mind an owner who owns multiple businesses and does not perform tasks therefore should not be paid for work produced. In short, as a passive investor (owner who builds a business and structures it to operate on its own) what can that owner expect to receive? Thank you. Great video.

@LYFEAccounting 3 жыл бұрын

Are you asking hypothetically or is this an actual scenario? If actual, I would need to know more about your business to give you a proper answer. Like your business structure and entity type

@michaelterrace8692 3 жыл бұрын

Great info! I would love to see a video for landlords who set up LLC’s. We just grew our business from 5 units to 20, and looking to go to 100. So, a lot of the income has been going back into the property, and the next year’s profits should be going into purchasing more units. I’m afraid of missing out on tax advantages that I’m not aware of.

@LYFEAccounting 3 жыл бұрын

Noted, Michael. I'll add this to our list of topic ideas. =)

@lalapapa3112 3 жыл бұрын

Where are you located?

@kanchiinternationalmart 2 жыл бұрын

Thank you for everything you have done for us. I have 3 kids(dependents) and I’m small business owner. And I’m wondering which one is best for me(1099 form or w2 form) for tax file ? Thank you.

@JobThako Жыл бұрын

Hi, this is so helpful. When do you make withdrawals, as and when you need money or at a specific day of each month? And is it a bad practice to withdraw several times during the course of the month?

@gloriakhayyam3673 3 жыл бұрын

Thank you for the information. I am an Independent Contractor that needs accounting services. I will reach out to your business.

@antoniofba667 3 жыл бұрын

I have an LLC (truck owner) what would be the best way to pay myself?

@Hood-Noah 8 ай бұрын

If you find a path with no obstacles, it probably doesn't lead anywhere ... A journey of a thousand miles begins with a single step … GOOD LUCK

@yvonneanderson9867 2 жыл бұрын

Thank you very much for this video. It was very helpful and answered some questions. Can we call your office for a free consultation?

@hittingtheroad5848 2 жыл бұрын

What about, when you work for a company (W2) and on the side you have a LLC, how the taxes play out ? 🤔

@lauradecker4213 2 жыл бұрын

How do Print On Demand stores fit in here? Are we a business? Or a side hustle?

@mathe3173 5 ай бұрын

Not all heroes wear capes.

@atulsingh7539 3 жыл бұрын

Can you please recommend books to learn these money/finance concepts... what am I earning as a business owner...how much do I earn, getting salary from my business, how much I am earning from the ownership of my business,...etc. Thank you.

@LYFEAccounting 3 жыл бұрын

Maybe we should write one? 😃

@modishmade 2 жыл бұрын

You mentioned earlier how a sole proprietor should pay themselves but did not give the answer, would that be as a draw? I do freelance work and don’t have a regular income and my expenses are currently more than I bring in in general as I’m practically making the money I need to build my business up. So I’m constantly investing in my business rather than being able to pay myself yet. But I still have to pay taxes on that which sucks lol

@brianjett1446 2 жыл бұрын

My goal is to create my own small online business in which I will be selling legal religious things. I know if I don't pay taxes and spading money soon or later the federal government will ask where am I getting this money from and why I haven't paid no taxes in this amount of time? Once they found out that I'm a business owner they say I own back taxes from the customers an also not paying the yearly taxes.

@theluxhelp 3 жыл бұрын

Great content. How can a company get accounting help from your agency..

@LYFEAccounting 3 жыл бұрын

Thanks! By contacting us at lyfeaccounting.com

@leejones4140 3 жыл бұрын

Could not find the video on business credit card

@user-vd4yk9oq6m 3 ай бұрын

Hello sir What is good for to take money from own business whose kids are small either w-2 or salary based

@sali6522 2 жыл бұрын

Hello, I am a new sub, learning a lot. I hope you can help me with this ❓❓❓❓❓. I just started my own business LLC, it won't be up and running until February first. I am thinking to make my business an S Corp. I want to pay myself a W2 because I figure if I do, I can buy a car and house with the W2. If not I may have to get a night job which I think will be a lot. Am I correct that I will be able to use my W2 from my business like a regular W2??????

@raethecoach 2 жыл бұрын

Great video and value. My question is about being a multi member managed LLC, selecting an S Corp tax filing. Do you still suggest the S Corp “salary”. Thank you

@aleanedwashington6040 2 жыл бұрын

I also have this question

@raethecoach 2 жыл бұрын

@@aleanedwashington6040 Hi! I found a video that explained this. My understanding is doing both a salary and a draw. Here's the link: kzfaq.info/get/bejne/mLeoaLh_xtHHm2w.html kzfaq.info/get/bejne/nbZkotB6vLLFhKM.html If you have not bought their course, you should look into it. Good luck!

@MrFashionForward04 3 жыл бұрын

This information is very helpful thank you! I have a question hopefully you can help. I am a custom costume designer and my business is a LLC taxed as a S-Corp. I understand from the video that I need to pay myself a salary, however based on how my company operates the monies coming in is based on having clients consistently and what the project is requiring. Before starting my business I used to pay myself an hourly rate also adding in overhead costs and expenses etc. as a freelance designer. Due to those factors is it smart to continue to pay myself hourly when the projects come in? What would your advice be? Thank you for your time.

@LYFEAccounting 3 жыл бұрын

This is very tough to handle in a comment and not direct financial advice, but it sounds like you should keep doing hourly and remain as an LLC

@MrFashionForward04 3 жыл бұрын

@@LYFEAccounting That makes sense. It definitely is easier hourly, I wanted to make sure I'm operating on the up and up. I greatly appreciate the quick response and advice.

@Radiateprosperity 2 жыл бұрын

Do you recommend having a payroll service issue your salary check and end-of-year W-2 form? Also, how does the w-2 read? I think it would like this: Company Name LLC Address City Zip and then my name in the respective boxes of the form just like any other w-2 if I was employed for another company but since I work for my own LLC then my name would not be part of the Company's name thus showing my name as the issuing w-2 form and the recipient since I am paying myself or how will it show? please comment and thank you!

@LYFEAccounting 2 жыл бұрын

W-2s are for employees (or shareholder-employees of S-Corporations or C Corporations). If you are not this, then you don't need to use a payroll service at all because you're going to be taxed on your net income - not the amount you distribute to yourself. What kind of entity do you have?

@bagchaser3859 Жыл бұрын

What if you are a llc partnership and decide to be taxes as a s-corp entity...are you still liable to pay Medicare or SSI taxes?

@MrThedumbbunny 2 жыл бұрын

This brings up questions for me. If a LLC has employees does their pay get taxed as profit or as salaries? Time to go read some more.

@LYFEAccounting 2 жыл бұрын

Are you trying to determine payroll taxes?

@MrThedumbbunny 2 жыл бұрын

@@LYFEAccounting i think i found my answers. You deduct the pay but pay the employer half of taxes for the payroll for an LLC which I dont think gets deducted. It did take some digging because most of the info is around owner taking money out and their payroll which has special rules. The tax implications and write offs for each type of business with regard to opersting expenses, disbursments and payroll might make good videos. (Deep dive into each option) I didnt check to see if you have these already though.

@sameerforyou01 3 жыл бұрын

can i have s-corp established for my long term investments? how would i pay salary for myself in that case?

@troybundy5140 2 жыл бұрын

What tools did you use to create / edit this video, if you don't mind me asking?

@the_sneakerhead_chef 2 жыл бұрын

Ho much do I pay myself as an owner that will not put me in a higher tax bracket, or does that even matter?

@reaganhernandez5861 Жыл бұрын

if the business is a s corp.. and the owner is going a w2, do we deduct med, unemployment ss and all the normal deduction

@asesoriacontableaudicontac5197 7 ай бұрын

Hi if i do draw money of my business account when i have to pay the medicaid and social s at thi end of the year or each months, how i have to do those payments