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Thread: How do I pay myself?

  1. #1

    Default How do I pay myself?

    Hi,

    I plan to be a sole proprietor and I want to open a business checking account that for cheque deposits. Now,now do I pay myself?
    Can I just pay myself in cash from this checking account?

    I think it's better to have another personal account and transfer 90% 95% of the funds for personal use. I don't expect to have a lot of business expenses at the beginning maybe some office stuff.

    Any other setups that will make the tax process easier?

    Thank you

  2. #2
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    Quote Originally Posted by new View Post
    Hi,

    I plan to be a sole proprietor and I want to open a business checking account that for cheque deposits. Now,now do I pay myself?
    Can I just pay myself in cash from this checking account?

    I think it's better to have another personal account and transfer 90% 95% of the funds for personal use. I don't expect to have a lot of business expenses at the beginning maybe some office stuff.

    Any other setups that will make the tax process easier?

    Thank you
    I use Intuit Payroll and pay about $25 a month for the service. Their service handles the direct deposit, tax forms and submission to the IRS and state along with the W2 and 1099's at the end of the year.

    I'd recommend signing up as a cost member, then using their discount/promo code here: Payroll services to easily pay employees, file taxes - Intuit Payroll

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    I also use Intuit Payroll and have for several years and swear by them.

    That said, unless you're incorporating or creating an LLC/LLP or something equally entity-like around your business to protect it from liability concerns, the money you make is yours to spend, so feel free to just cut yourself a periodic check from the proceeds and deposit that check into your personal checking account (just to help keep the books separate). Just remember that if you are required to pay estimated tax payments, make sure you do that. A visit to a small business accountant for a couple of hours to set up your books and get all your questions answered will be the best investment you can make in your business and your personal finances.
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  4. #4

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    So does Intuit Payroll calculate taxes automatically every month and the rest(check minis taxes) are just earnings that I can use?

    @Freelancier
    I agree on the small business accountant. That is the plan, just need to find one.

    I also want to specify that I have less than 3 clients a year. 25$/month seems expensing in this case (I think). Is Intuit Payroll still my best option?

    Thank you

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    Mr. Tax Man
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    If you're a sole proprietor, you don't take a "paycheck" or a "salary". Instead you take "draws". So if you want to pay yourself $400, just write a check for $400.

    The biggest thing I'd recommend is that you take money out for personal use in a lump sum (e.g. a "pay check"). Some people think they can use their business debit card for all their personal life purchases, and it becomes a nightmare to know what is business-related and personal-related at tax time, especially if you're not maintaining good records. Minimize all the "personal" stuff going on in your business account, as if you're audited the IRS or state don't want to be sorting through your personal life. Otherwise, they can go on the extreme of assuming everything is personal and then you'll be having to work that much harder to support all of your expenses.
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    if your the only employee its easy

    just write yourself a check from your business account

    let your accountant figure out the taxes/ss later

    i pay myself whatever i want...if i need more during the month i just write out another check....

    talk to your accountant...he is the one who should setup your quickbooks for you and tell you how to pay yourself

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    So does Intuit Payroll calculate taxes automatically every month and the rest(check minis taxes) are just earnings that I can use?
    Yes, as part of Intuit Payroll, you tell it the salary/monthly draw and it will calculate payroll taxes and pay them for you electronically (as well as deposit the funds via direct deposit). And, yes, unless you have an entity around your business (LLC, Corp, etc.) that's a lot of money that you don't need to spend. It doesn't matter how many clients... it matters whether you need to take your money as a salary or not. If the entity is being paid the money from your work, you can't then use your business checking as your personal bank account (or bye-bye to the liability protection that entity is supposed to provide you), so you have to put procedures in place to pay yourself a regular salary + dividends or bonuses. But if you're just a sole prop with no business entity, you don't need to do that... you just pay yourself whenever you want and make quarterly estimated tax payments.
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    I agree with everyone here, write yourself a check. My friend who owns a laundromat writes herself a check like a regular employee.

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    If you're a sole proprietor, you don't take a "paycheck" or a "salary". Instead you take "draws". So if you want to pay yourself $400, just write a check for $400.

    The biggest thing I'd recommend is that you take money out for personal use in a lump sum (e.g. a "pay check"). Some people think they can use their business debit card for all their personal life purchases, and it becomes a nightmare to know what is business-related and personal-related at tax time, especially if you're not maintaining good records. Minimize all the "personal" stuff going on in your business account, as if you're audited the IRS or state don't want to be sorting through your personal life. Otherwise, they can go on the extreme of assuming everything is personal and then you'll be having to work that much harder to support all of your expenses.
    I agree with this.

    As a bookkeeper I always recommend to only take larger draws at a time such as one a week. If you end up paying for every purchase out of your business account, it ends up being more work to post entries as well as when reconciling accounts. If you are looking after your own books, it takes additional time. If you are paying someone, then it will cost more for this. Keep it simple and write only a few cheques to yourself a month.
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  10. #10

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    Quote Originally Posted by ThomasTroy11 View Post
    I agree with everyone here, write yourself a check. My friend who owns a laundromat writes herself a check like a regular employee.
    That should work just fine if you don't have a payroll software. If you do, just use that.

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