If you own a business, there will likely come a point in time when you consider putting yourself on payroll. However, the timing of this transition is not always crystal clear. Let’s take a look at the best approach to putting yourself on payroll.
When is the Best Time to Add Yourself to Payroll?
The answer to this question ultimately hinges on your company’s structure. As an example, if your business is classified as a Partnership or a Limited Liability Corporation (LLC), it is recommended that you pay estimated quarterly taxes. Our Hammond LA team is here to handle this challenge on your behalf. Partnerships and LLCs can also cut a paycheck directly to the owner, either in the form of a salary or an hourly wage. However, this money can be paid at the schedule you deem most appropriate, whether it is bi-monthly, weekly, etc. Alternatively, if your business is classified as an S Corporation, the law mandates that you are paid wages that constitute “reasonable compensation” in the context of employment law.
Do not Hesitate to Hire Yourself as an Official Employee
Plenty of business owners overlook the fact that they can become an official employee of their business and draw a regular paycheck. In fact, it is often beneficial to add the business owner to payroll as a self-employed entrepreneur. Though adding yourself as an employee might feel redundant and unnecessary, it is worth the effort.
Adding yourself as an employee does not mean you have to expand your role or take on additional responsibilities. Become an official employee of your business and you will finally separate yourself from the enterprise. In short, this is your opportunity to distinguish your personal life from the business. Once you become an official employee of the business, there is the potential to exit your role at some point down the line or change your role within the company as necessary. In fact, carving out a formal role tied to a paycheck makes it that much easier to sell the business down the line. Just be sure to create a list of your job duties and make fellow employees aware of the responsibilities of the position so others can fill in when necessary.
Put Yourself on Payroll Sooner Rather Than Later
If your business has launched, it is in your interest to add yourself to payroll sooner as opposed to later. Putting yourself on payroll give you a better idea of what you will owe in taxes, helping you establish an accurate budget. Furthermore, becoming an official employee of the organization creates the opportunity to qualify for healthcare insurance and additional benefits. The icing on the cake is the fact that adding yourself as an official employee clarifies your income earnings as they relate to your profits as an owner of the business, simplifying accounting challenges all the more.
Putting yourself on payroll sooner rather than later is also sensible in the context of taxation. Federal and state governments tax money earned as an employee differently than income earned as a business owner. Though the advantage to paying such taxes separately is somewhat minor, every penny counts.
Schedule an Appointment With Sensible Services ABC Today
If you are considering putting yourself on payroll or if you need assistance with bookkeeping, taxes or another business component that will help your company grow, reach out to us today. Our team is here to help your company maximize its true potential. Contact us today to schedule an appointment. You can reach us by dialing (985)222-2088 or by filling out our convenient online contact form.