Were you aware that almost 100% of small businesses in the United States have fewer than 500 employees?
The more employees you have, the more complicated your payroll can become. Aside from other employees, it can also be difficult to figure out how to pay yourself. The last thing you’d want is to find yourself on the wrong side of the law.
Keep reading to learn all about how to pay yourself as a business owner depending on your business’s structure.
Paying Yourself as a Corporation Owner
If you own a business that’s filed under a corporation structure, then you’re required by law to put yourself on the payroll. This includes whether you’re a sole proprietorship or an LLC without an S Corp election.
With this in mind, you’ll end up paying yourself when it’s time for paying employees, too. However, there’s some wiggle room depending on the exact structure of your business. For instance, an owner of an S corporation may have the option of taking regular draws or distributions in addition to their salary.
If you don’t feel confident about your business finance management, then you can rest easy after you seek out professional guidance.
How to Pay Yourself as a Partnership Owner
When owning a business under a general partnership structure, you shouldn’t think of yourself as an entity separate from the partnership. Instead, each partner is an extension of the partnership and is taxed at the same rate. With this in mind, you shouldn’t be surprised to learn that business income is also something that should get listed on the partners’ income tax return.
Unlike a corporation owner, partners don’t have separate salaries either. In this scenario, partners are legally allowed to take regular withdrawals. The number of withdrawals is completely up to the partners’ discretion.
How to Pay Yourself as an LLC Owner
The business finances of an LLC are more flexible when compared to a corporation or a partnership. For example, an LCC owner can decide the manner in which they’re taxed.
The default category of an LLC depends on its type. If you’re the only owner of the LLC, then it’s considered a sole proprietorship while multiple owners are a partnership by default. You’ll have to go out of your way to elect yourself as a corporation if you’d like to pay yourself via a salary.
Are You Ready to Pay Yourself as a Business Owner?
Now that you’ve learned how to pay yourself as a business owner no matter what your structure is, you can enjoy the fruits of your labor. While it may seem complicated at first, it’ll be like a walk in the park once you can get over the learning curve.
To make sure that everything is legal and streamlined, it’s important to find professional help. Whether you run a small or medium-sized business, we’re ready to offer you top-of-the-line payroll services.
Feel free to reach out about pricing or with any other questions you have regarding our high-quality payroll solutions.