{"id":1186,"date":"2022-04-28T00:30:24","date_gmt":"2022-04-28T00:30:24","guid":{"rendered":"https:\/\/prettybooks.com\/magazine\/?p=1186"},"modified":"2022-05-11T16:14:37","modified_gmt":"2022-05-11T23:14:37","slug":"its-time-to-pay-myself-can-i-just-take-money-right-out-of-my-businesss-bank-account","status":"publish","type":"post","link":"https:\/\/prettybooks.com\/magazine\/2022\/04\/28\/its-time-to-pay-myself-can-i-just-take-money-right-out-of-my-businesss-bank-account\/","title":{"rendered":"It’s time to pay myself. Can I just take money right out of my business’s bank account?"},"content":{"rendered":"

Hello Abacus,<\/strong><\/em><\/p>\n

I have been a therapist for what feels like forever. I recently decided to start my own private practice and have been setting up my business. It’s been great so far, except when it comes to paying myself. I am at a loss. Am I able to just take money right out of the bank? What do I need to do for taxes?<\/strong><\/em><\/p>\n

Thanks,<\/strong><\/em><\/p>\n

Preparing for Payday<\/strong><\/em><\/p>\n

 <\/p>\n

 <\/p>\n

Dear Preparing for Payday,<\/p>\n

Congratulations on your new practice! Paying yourself can be tough, especially when you consider how taxes work. My suggestion is to involve your CPA.<\/p>\n

Ask your CPA about the legal requirements for your type of business and the options for payment. Some types of business don’t have options, meaning it really depends on the type of legal entity.<\/p>\n

The owner of a C-Corp is paid through a W-2, like any other employee. If you are a sole proprietor or are in a partnership, you can take money directly from the business as an equity draw or a guaranteed payment (expense payment) for your work. You can also be paid in a combination of the two, plus draws or dividends, depending on your profitability.<\/p>\n

Each of these options have profitability and tax advantages, which is another reason to consult your CPA. Bring some financial reports that show your recent income, expenses, and net income so they can determine the best allocation and payment method for you.<\/p>\n

Have a conversation with your CPA about what each option would mean for your business and how it would impact your taxes. Ask them to help you estimate taxes so that you can plan your entire year. That way you won’t have a surprise bill.<\/p>\n

Just to be clear, you are taxed on whether or not your business made money, not on whether you took money out. Let’s say your business made $10,000. Whether that money stays in your business’s bank account or is transferred to your personal account, you will pay taxes on it.<\/p>\n

When it comes to accounting, consistency is key. Your CPA will work with you to create a process to make sure your payment is consistent month to month. That way it is easier to account for and you’ll be able to estimate how much you’re getting each month. Of course, if you’re the sole owner of your business you are entitled to anything it makes. If, at the end of the day, there is extra money in the company bank account, you can take that out and pay yourself with it.<\/p>\n

Good luck,<\/p>\n

Abacus the Accountant<\/p>\n","protected":false},"excerpt":{"rendered":"

There are tons of ways to pay yourself for your time spent in your business. Owners draw, taking money right out of the bank account, getting a regular paycheck. But what’s right and wrong for your business? Abacus the Accountant takes on the best (and legal) way to pay yourself in this week’s edition of Dear Abacus.<\/p>\n","protected":false},"author":7,"featured_media":1234,"comment_status":"closed","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":[],"categories":[53],"tags":[],"yoast_head":"\nIt's time to pay myself. Can I just take money right out of my business's bank account? - Pretty Books Magazine<\/title>\n<meta name=\"description\" content=\"There are tons of ways to pay yourself for your time spent in your business. Owners draw, taking money right out of the bank account, getting a regular paycheck. But what's right and wrong for your business? 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