How Much Should I Pay Myself As a Business Owner?
There is no standard formula for how much you should pay yourself as a business owner. As a sole proprietor, partner, or LLC owner, you can legally draw as much as you want from your equity.
However, you need to consider all the aspects of your business finance. These include operating expenses, debts, taxes, and business savings while determining your pay.
For this, you would first have to look into the net income of your business. This is nothing but the income left after deducting all business expenses from your gross revenue.
After deducting business expenses, the next step is to find out how much you should save for your taxes.
Then, take into consideration your monthly debt payments and then plan for business savings which can be reinvested in the business.
Finally, after considering all the above parameters, you can now determine how much you can pay yourself.
To find out how much money would act as sufficient pay, you would first have to determine your personal needs.
You can first determine your fixed expenses like rent or mortgage. Then, you can work out the variable expenses that are necessary for living and that change each month. For instance, groceries, etc.
Do consider other expenses like phone bills, cable TV, dining expenses, etc. Accordingly, if you have a good amount of earnings, you can pay yourself well.
However, if the earnings are less, you need to have a clear understanding of your priorities in personal life and in business.