Logo Header

News & Advice

How Much Do I Pay Myself From My Business?

Determining how much to pay yourself from your business depends on various factors, including your company’s financial health, your personal financial needs, industry standards, and legal considerations.

Here are some steps to help you decide on a suitable salary…

  1. Assess Your Financial Needs – Start by evaluating your personal financial requirements. Consider your living expenses, debt obligations, savings goals, and any other financial commitments you have. This will give you a baseline for how much income you need to draw from your business to support yourself adequately.
  2. Review Your Business Finances – Analyze your business’s financial performance, including revenue, expenses, profitability, and cash flow. Determine how much your business can afford to pay you while still covering operational expenses, taxes, debt obligations, and reinvestment in the company.
  3. Consider Industry Standards – Research salary benchmarks for similar roles in your industry or region. Understanding the typical compensation for owners or executives in comparable businesses can provide a reference point for setting your own salary.
  4. Consult Legal and Tax Advisors – Ensure that your salary complies with legal requirements, including minimum wage laws, employment regulations, and tax obligations. Consulting with legal and tax advisors can help you structure your compensation in a way that maximizes tax efficiency and minimizes compliance risks.
  5. Balance Retained Earnings and Compensation – Evaluate the balance between reinvesting profits into the business (retained earnings) and distributing income to yourself as compensation. Striking the right balance can help ensure sustainable growth while adequately rewarding your contributions as a business owner.
  6. Performance-Based Compensation – Consider tying a portion of your compensation to business performance metrics such as revenue targets, profitability goals, or other key performance indicators. This can align your interests with the success of the business and incentivize growth.
  7. Review Regularly – Periodically review and adjust your salary based on changes in your personal financial situation, business performance, and market conditions. Regularly reassessing your compensation ensures that it remains fair, competitive, and aligned with your evolving needs and circumstances.

There is no one-size-fits-all answer to how much you should pay yourself from your business. It’s essential to strike a balance between adequately compensating yourself for your contributions and ensuring the financial health and growth of your business. Regularly monitoring your finances and seeking professional advice when needed can help you make informed decisions about your compensation as a business owner.