Frogger Why Frogs

How do I pAy myself?

We previously discussed how do I figure out how much should I pay myself?

There’s a follow up question that we will often get asked as well, which is what’s the best way for me to pay myself.

From a legal perspective, there’s two different ways as an owner that you can pay yourself.

1) The first is through W-2 wages,

2) An owner’s distribution or a draw.

Now which one of those is going to be advantageous for you is ultimately going to depend on your legal business structure and what the IRS allows.

Of course there’s the consideration for what’s going to be most advantageous for you from a tax perspective as well.

So for getting the right answer to that, you’re going to want to have a conversation with your tax professional, because it will depend on how you’re going to be filing your taxes.

If you are a relatively small company you’re doing probably one of two things.

1) You’re set up as an LLC/partnership

2) You’re set up as an S corp or possibly an LLC filing as an S corp.

There are differences in terms of how you can take your pay from W-2 and then the rest and owner’s draws and be able to have some payroll tax efficiencies from doing that.

How to determine what those numbers are when you start doing all of that gets pretty technical, but those are the kinds of questions that you want to be able to go and ask your tax preparer in order to figure out.

Once we know from the last video how we’re going to take our owner’s draws or how much we’re going to take now, we can actually figure out the mechanism by which we’re going to pull that money out of the business.

1 thought on “How do I pAy myself?”

  1. Pingback: How much should I pAy myself? - Our Team Accounting

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