How to Pay Yourself as a Small Business Owner

So you've built this business you’re really proud of, but there's one question that keeps nagging at you: "How do you actually pay yourself?"

Here's a quick guide you can down with your morning coffee that’ll help you navigate that paycheck and keep your business finances healthy, without a hassle.

“What About Cash Flow?”

Let's be honest, sometimes profits at the start of a business are a little like that sunshine after a storm – you see it peeking through, but it's not quite there yet.

In those moments, taking a minimal salary to cover your essentials is totally okay, and most of that money will probably go back into the business, anyway. It doesn’t have to be a long-term thing.

Salary vs. Dividends

Fast forward a bit to when business starts booming. This gives you more options when it comes to paying yourself:

Salary:

• This is your reliable income, just like a regular job.
• It's great for things like loans or retirement plans.
• The downside? The taxes can be a bit complicated.

Dividends:

• This is a way to share your business's post-tax profits with yourself, the owner.
• Different from a salary because it's not a fixed amount.
• They're usually taxed less than a salary, but the amount depends on how much profit your business makes each year.

The option you choose depends entirely on your own personal needs and circumstances.

“So, How Often Should I Pay Myself?”

There's no one-size-fits-all answer. Monthly is a popular choice, but pick what works best for your cash flow.

“Can I Do Both Salary and Dividends?”

Absolutely! It can be a tax-efficient way to go, but chatting with a financial advisor is a smart first step. They can help you figure out the perfect mix for your unique situation.

“Can I Increase My Pay?”

As your business takes off, so should your compensation – so be sure to regularly review your pay and adjust it as needed.

It's all about rewarding yourself for all the hard work you're putting in (which is a LOT - we see you!)