Paying yourself

[i10casual]

I'm just curious how business owners pay themselves. Do you write yourself a regular paycheck, paying and matching all the taxes? Do you take the pay out of your equity? Or do you use the business as your personal bank account but not claim personal expenses under your business expenses.

I'm running a business with my father very similar to the Tommy Boy film. We are debating on how to best pay ourselves.

 

[munchausen]

My father owns a corporation and pays himself a salary just like any other employee. Don't know what kind of business you're running, but that's basically the "safe" way to do it.

 

[HgaleK]

Originally Posted by i10casual

I'm just curious how business owners pay themselves. Do you write yourself a regular paycheck, paying and matching all the taxes? Do you take the pay out of your equity? Or do you use the business as your personal bank account but not claim personal expenses under your business expenses.

I'm running a business with my father very similar to the Tommy Boy film. We are debating on how to best pay ourselves.

What is it? LLC, LLP, LP, GP, S Corp? Salary is the way most people do it, but there a whole lot more to it depending on what it is.

 

[cross22]

Originally Posted by i10casual

I'm just curious how business owners pay themselves. Do you write yourself a regular paycheck, paying and matching all the taxes? Do you take the pay out of your equity? Or do you use the business as your personal bank account but not claim personal expenses under your business expenses. I'm running a business with my father very similar to the Tommy Boy film. We are debating on how to best pay ourselves.
Depends on your exact set up. Most people would rather take the money as profit rather than salary so there are laws requiring corporations to pay active business owners a "reasonable" salary and you must file all necessary federal and state paperwork (employee withhodling, quarterly reports, employment insurance, etc). Talk to an accountant and let him handle these for you. Get a business checking account and keep your personal and business expenses completely separate.

 

[HgaleK]

Originally Posted by cross22

Depends on your exact set up. Most people would rather take the money as profit rather than salary so there are laws requiring corporations to pay active business owners a "reasonable" salary and you must file all necessary federal and state paperwork (employee withhodling, quarterly reports, employment insurance, etc). Talk to an accountant and let him handle these for you.

Get a business checking account and keep your personal and business expenses completely separate.

Read and re read.

 

[JoelF]

For my little consulting thing I run everything on a a Schedule C, no corporation bullshit to deal with. End of year add up the invoices check against 1099s pull out the business expenses from on line bill pay and credit card summaries. Everything just hits my one account and I take cash and pay expenses from that. But that's about the simplest concievable type of business, probably would not work for anything more complex.

 

[acidboy]

Originally Posted by i10casual

I'm just curious how business owners pay themselves. Do you write yourself a regular paycheck, paying and matching all the taxes? Do you take the pay out of your equity? Or do you use the business as your personal bank account but not claim personal expenses under your business expenses.

I'm running a business with my father very similar to the Tommy Boy film. We are debating on how to best pay ourselves.

same set-up. we get regular salary, used to be very low compared to my peers in the corporate world back in the day, but now we have a satisfactory compensation package.

what we don't have though is cash dividends, which a lot of private businesses here hand out if the performance was good in the last period.

 

[Matt]

I pay myself a salary.

 

[grundletaint]

salary as needed. much easier to keep expenses separate.

 

[i10casual]

Thanks for all the replies.
We are a LLC. We make gun holsters, mostly the western style. I take a salary as the EVP. At our ex-accountants request I took my father, the CEO, off salary. He usually just uses the business's money for his needs, car payments, house, clothing, on top of his salary. But he would never cash the salary checks. This drives me batty, especially when I reconciliate.

He also puts in money for the business from his personal account. Usually for petty cash and sometimes to cover payroll. So we are paying him out of business profits when he needs money. I let our new CPA figure the taxes. But this is all so messy I want to figure out a better way. Thanks for letting me bounce this off you guys.

 

[javyn]

I pay myself millions in bonuses, even when I **** up. Screw the shareholders.

Yours truly,

-The Bank

 

[Blackhood]

Originally Posted by i10casual

Thanks for all the replies.
We are a LLC. We make gun holsters, mostly the western style. I take a salary as the EVP. At our ex-accountants request I took my father, the CEO, off salary. He usually just uses the business's money for his needs, car payments, house, clothing, on top of his salary. But he would never cash the salary checks. This drives me batty, especially when I reconciliate.

He also puts in money for the business from his personal account. Usually for petty cash and sometimes to cover payroll. So we are paying him out of business profits when he needs money. I let our new CPA figure the taxes. But this is all so messy I want to figure out a better way. Thanks for letting me bounce this off you guys.

I would definitely put him on salary, give him a separate expense account and treat any money he puts into the business as shareholder finance.

That covers your ass in a number of areas, specifically it allows you to see exactly what he is taking out of the business in relation to his salary.

If he is stuck on the idea of using one account and not having any "personal" finance, then consider getting him a personal credit card and simply pay him an amount roughly equal to the monthly bill. It'll save you (or your CFO) a big bundle of trouble somewhere down the line.

 

[Douglas]

Originally Posted by i10casual

Thanks for all the replies.
We are a LLC. We make gun holsters, mostly the western style. I take a salary as the EVP. At our ex-accountants request I took my father, the CEO, off salary. He usually just uses the business's money for his needs, car payments, house, clothing, on top of his salary. But he would never cash the salary checks. This drives me batty, especially when I reconciliate.

He also puts in money for the business from his personal account. Usually for petty cash and sometimes to cover payroll. So we are paying him out of business profits when he needs money. I let our new CPA figure the taxes. But this is all so messy I want to figure out a better way. Thanks for letting me bounce this off you guys.

This is a ridiculous situation. You need a bright line between personal and business. Your Dad needs a salary, or if it's easier, set up a checking account for him and make distributions to it (or salary direct deposits). You can make those deposits. The business is not his piggy bank, one way or the other.

Not only is this going to be a train wreck if you're ever audited, but it's also preventing you from ever getting a good handle on your business, analyzing it meaningfully, and becoming successful. Change it now.