How to Pay Yourself in Small Business by Lamar Van Dusen

However much you make in a small-scale business, you must always be fair, according to Lamar Van Dusen. 

Set a budget every month. This will help you with managing your household budget. This is where your small business’s rainy-day reserve can be useful. 

  A cash reserve reduces the necessity to dip to your wallet when you have an unexpected cost at the store or in the office. Also having the financial security in your personal life allows you to relax and you can run your business more efficiently.
  Lamar Van Dusen from Canada believes you can determine the amount you will be able to pay as a small-business owner using the assistance of the bookkeeper or accountant. 

 They’ll help you decide an amount for the current and also a plan in the near future.

What are the best ways to pay yourself?

 Once you have decide how to go about it however, you still have to decide which amount to you will be able to pay as a small-business owner. 

 This amount should be in line with the demands of your household as well as your company.

  The salary you decide to pay yourself is vital according to Lamar Van Dusen. Small business owners often research the typical salary of the business and the type of job they’re hiring for. 

 It’s a great idea however certain business owners prefer taking an amount of their company’s earnings rather than committing to a certain number of dollars. This allows for varying levels of growth and decline.

  You shouldn’t overvalue your earnings when you’ve get excellent employees to support your company and pay them cheap prices. This could result in a hostile workplace and reduce morale.

What is the business’s requirements?

It is essential to have sufficient funds in your small company to cover the following items:

Costs: To ensure that you don’t take too much cash from the company at the wrong time, you should keep a detailed record of the amount you owe in respect of when the payment is due. 

Experts in accounting recommend against business owners trying to estimate their cash flow requirements based on the use of guesswork. Reserve some money to cover taxes, too.
Money for rainy days: Put some funds aside to help cover financial issues. For example, you could save funds in 30 to 45 or 90 days of expenditure.

Reinvestment: Set aside some cash to invest in future expansions and improvements. 

 It is inevitable to purchase new office equipment, try an innovative marketing strategy or consult with a professional.
 The daily expenses of living should be account for in your budget for the household, along with payments for the mortgage or other debts. 

 Be sure to think about the possibility of retirement or insurance plans that your business might have handled for you prior to you starting independently.

Balance and harmony

The home budget as well as the budget for small businesses will contain items that can be negotiate. Be prepare for a bit of sharing and taking, particularly in the beginning of your business.

First, make sure to keep your personal and professional finances distinct.

  It’s ideal to separate your personal and corporate financials before deciding on how you’ll pay yourself. Your small-scale business requires a bank account. 

  A company credit card is a good alternative in conjunction with opening the bank account. The card can be used for purchases that are refunded through the bank account of your company. 

 This is an excellent way to increase your small company’s credit score, which is going to grow in importance as the business grows.  
  Small Business owners usually are faced with two ways to pay  themselves either through salary or owner’s draw. Your personal situation will determine which one is best for you. 

  Your financial standing and the organizational structure of your company are both important. You should seek out the guidance of a financial advisor or accountant in determining the best strategy most efficient for your small-scale company.

A draw for the owner is what?

  One method small business owners could use to be compensated is through the owner’s draw, according to Lamar Van Dusen. 

  In simple terms this is to take your salary and subtract it from the earnings of your small company. 

  It’s important to remember that you have to first take note of all costs of business in order to ensure the earnings you will earn.

  One of the most common ways for sole owners to make payments to themselves is through drawing the proprietor’s check. 

   In essence, they pay for the costs of the business, then set aside any funds they have set aside for growth in the future or anticipated expenses before paying themselves the remainder. 
  Owner’s draw are not affected by Social Security, Medicare, or tax withholding for income when you pay them, so keep this in your mind. 

   Save some cash to cover any taxes you’ll have to pay since you have to declare the earnings when you file. 

  In this instance you may also have to pay quarterly taxes on your income. The accuracy of your records can help avoid any issues or unexpected surprises when it comes to Tax Day.

What if I don’t want or demand to receive payment from my small-scale company?

  This is a great idea for small-scale business owners who have gotten past the initial stage and are now making payments to themselves. 

  It shows your commitment to your business and determination to see it succeed as the company’s owner. 

  The salary you earn shows lenders financiers, finance officers and potential investors that you’re confident of your company’s performance and peace with the compensation you receive. 
   The fact that you pay yourself proves that you run a an legal business you’re operating.
  The question of how to pay your payment is an additional. You might think about settling for an income and putting the money to retirement savings or a different goal.

 When you’re in a position that you are able to achieve this without relying upon the profits generated by your company.

Conclusion

   You’d like to use the cash you earn from your company on items that will increase its growth, as well as paying you and your employees.

 You decide to take an owner’s drawing or a salary, according to Lamar Van Dusen. 

  If you can safeguard yourself by obtaining insurance for your business, you can save the money that your business earns by paying for claims and protecting against lawsuits.