Episode 08: Foundations Part 2: Paying Yourself
Now that you've narrowed down what entity type fits best, it's common to wonder about the best way to pay yourself. For sole proprietors, single-member LLCs, and partnerships, for the most part you can't pay yourself wrong – you're taxed on all the profits either way, whether you pay yourself all of it or leave it in the business account. For an S-Corp election, you'll need to run payroll to get the tax benefits (Gusto is a solid option for payroll). As for timing, set it up however works best for you. Just be aware that as an S-Corp, you can't just transfer money to yourself without running it through payroll as a bonus or writing yourself a check as a profit share.
Key Takeaways
Sole proprietors, single-member LLCs, and partnerships are taxed on all profit regardless of how it's paid out.
An S-Corp election requires running payroll to capture the tax benefits.
S-Corp owners can't simply transfer money to themselves - it has to go through payroll or a documented profit share.
Payroll timing can be set up however works best for the business owner.
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Music credit: Neon Fairies by Wolves
Note: This episode is from our previous podcast, Confident Money.
