Although businessowners and entrepreneurs get to decide on their own salary, determining the amount can be one of the hardest decisions to make. Managing both your business’ and personal finances can get tricky, and striking the right balance between paying yourself too much or too little is an age-old conundrum that faces every businessowner.
Importantly, owners shouldn’t make the mistake of paying themselves from the profits their businessmakes. Before paying yourself with the money coming into your business, owners need to take things like tax, payroll, location costs of Avalonand fixed costs into account.
There is also no point in paying yourself a little amount if it is going to cause financial problems at home. Personal financial issues are very stressful, and stressed owners often don’t make good business decisions. Owners need to pay themselves enough money to live comfortably without worrying.
Businessowners need to make sure that they pay themselves regularly. Dipping into businessfunds at random times when you think you need to will appear suspicious to the ATO, and may lead to the office auditing your business. Setting up regular payments for yourself and your employees and sticking to them means owners don’t have to worry about taking out the occasional large lump sum.
How much an owner can afford to pay themselves can also be restricted by the legal structure of their businessi.e. sole traders can pay themselves whatever amount and whenever they like, but other incorporated businessesusually have businessowners on the payroll.
Ultimately, the salary businessowners pay themselves depends on the success of their business. Owners who run businessesthat bring in more money can afford to have a higher salary. Owners going through a tough time financially are in a different position. When in doubt, check with your accountantto find out what will work for you. At NBA Avalon, our accountantsare proficient in XEROto help the process.
Northern Beaches Accountants is a dedicated team with offices in Manly, MonaVale, Narrabeen, Newport, Avalon, Dee Why. Our business accounting services can be tailored to suit businesses of any size, at any stage of their life cycle.