* How much can I pay myself? *

The amount you can pay yourself depends on your form of business, how much you earn, how much you owe in tax and what you want to do with any excess funds. See the sections below to help put these pieces together.

Generally your business profit is yours but you also have to pay tax on this amount. Your profit is split in these main buckets:

• Owner pay: money that goes from the business to you, either to your personal checking or personal savings.
• Taxes: money you pay to the government for your own income taxes at each estimated tax deadline and at tax time.
• Retirement: money you set aside for your future in either a personal or business retirement plan.
• Leave in the business: money you didn't take out yet because the business may need it for upcoming expenses or as a cushion for emergencies. 

Factors that can affect how much you can pay yourself include: 

• Having low or high business expenses. The lower your business expenses the higher your profit (more money is left for you if you spend less to run the business). See this page for more on Tax Deductions. It is a good goal to have business overhead expenses be 30% of your revenue or less, if possible. Overhead includes all the general costs to run your business such as advertising, insurance, office supplies, software, etc. It does not include employee payroll. 
• Having a high tax rate and being in a high tax state means less can go to you because more has to go to the government. See this page on Estimated Taxes.
• Having the financial freedom to max out retirement means less goes to you now since more of your profit is going to you in the future. If you have high earned income or other income you may be in this position. 

* How do I pay myself as a sole proprietor or LLC owner? *

Sole proprietors and LLC owners take owner draws from the business when they want. It's a transfer or payment from the business to you when cash is available. It's simple and easy, but make sure you are also setting aside money for taxes weekly or monthly. See resources below for more on estimated taxes.

Here is an example:

$100,000 revenue from clients/customers
-$20,000 business expenses
=$80,000 net profit / net income

This $80,000 is what you will be taxed on. You pay taxes throughout the year on or before each estimated tax deadline. Let's say you estimate your taxes will be 28% of your profit, that means during the year $22,400 needs to be saved and/or paid into the appropriate federal and state governments. Simple Profit can help you come up with a customized estimated tax amount based on your business and any other earnings,

Let's also say you want to save $2,500 into a retirement plan during the year. And you also want to increase the savings inside the business for upcoming expenses by $2,000. 

That leaves $53,100 to be distributed to you during the year ($80,000 - $22,400 to the government - $2,500 to retirement - $2,000 left in the business = $53,100). 

If you wanted to pay yourself monthly in even amounts, even when you take time off, you would aim to pay yourself $4,425 per month, and put $1,866.67 aside for taxes and $208.33 aside for retirement each month. 

* How do I pay myself as an S-Corp owner? *

S-Corp owners who work in the business are paid as employees with W2 wages and also take shareholder distributions which are like owner draws. The paycheck will withhold tax on the W2 wages, but you can ask the payroll system withhold extra to cover the tax on your business profit. 

If you have this situation before you pay yourself taxes: 

$100,000 revenue from clients/customers
-$20,000 business expenses
=$80,000 net profit / net income

...you then need to choose a reasonable salary that is fitting for a person working in and running a business making $80,000. See my video on setting a reasonable salary here: Reasonable Salary Video. If you choose a reasonable salary of $45,000 because that is fitting with your amount of work, skill and experience and the marketplace, your profit now looks like this: 

$100,000 revenue from clients/customers
-$20,000 business expenses
-$45,000 owner W2 wages <- paid via payroll
-$4,300 employer payroll taxes for owner
=$30,700 net profit / net income <- paid via distributions

You will use a payroll processor to run the payroll and tax will be withheld for the $45,000 owner W2 wages. The profit is distributed to you directly via transfers from business to personal.

For the tax on the profit, you will either make estimated tax payments for the tax on the $30,700 profit or add extra withholding to your paycheck to cover that tax.

Simple Profit can help with this by giving you a way to calculate your total estimated taxes, see what is already being withheld from you paycheck and the remainder is the amount you can add to your paycheck as extra withholding. 

* What if I have more questions * 

It's common to have questions about running your business and Simple Profit has many resources to help for free or at a low cost. 

Simple Profit has many ways to learn more, get education, answers and support. See the list of free resources and low cost membership resources below, and more details on the main Simple Profit page.