How to Pay Yourself as a DBA or Sole Proprietor

so are you confused about how to pay yourself as a single member LLC or a DBA then this video is for you so let me just first start off with identifying the main reason that you have an LLC which is to separate yourself from the business and to create asset protection caveat and this post is not related to those people who are set up as an LLC but pay yourself and are taxed as an S corporation that is for another video and we'll go down that rabbit hole in the future so most people are really scared about doing this and they never feel comfortable how they're paying themselves but I will say if you have any employees then you really want to get yourself a payroll service now we utilize gussto payroll for our payroll clients and we highly recommend it give us a call like we want to talk about that but if you try to do payroll on your own you're going to get in trouble I went under percent guarantee it is a finicky system and to do it in a manual way will always always get you in trouble whether you calculate it wrong or you file it in the wrong time frame get yourself a real service hands down so again as a single-member LLC you are what's called a disregarded entity so what that means is you are taxed on Schedule C of your personal tax returns you are not doing a separate business tax return or say it's all gonna be on your personal tax return number one you want to always make sure that you've got separate bank accounts so as you're going to be paying yourself never run everything through the same bank account so I see a lot of clients do this and it's a big no-no I'm gonna say you're piercing the corporate veil by nut by commingling your funds and so always make sure you have a separate business and a separate personal bank account to run everything out in its simplest format the only thing you're gonna do to pay yourself as a single member LLC or a DBA is you're going to cut yourself a check for whatever dollar about you want that to be and that could be actually writing a check that could be transferring money from your business checking account to your personal checking account or it can be some kind of mechanism that moves by a four point A to point B the amount that you're gonna pay yourself is going to be completely up to you I highly recommend a couple different ways I like to look at the net profit of the business at various points throughout the month to pay yourself the net income on that business to your personal I would also recommend looking into the book called profit first where it identifies a certain percentage of revenue that you pay yourself out of each paycheck that you received from your clients whatever it is just decide on a regular amount that you pay yourself so you don't get into the habit of driving your paycheck up when times are good and driving your paycheck down when times are bad create some consistency for yourself because at the end of the day you're going to create you want to make a living on this salary that you point out so I highly recommend you making it as consistent as possible so as you don't mess up your personal budget the accounting for this my last piece of bread-and-butter what I care about the most the accounting piece for this is going to be the following you're going to decrease your cash and you're going to increase your distributions so the distributions account is going to be an equity account on your balance sheet a lot of clients that I talk to to get into this habit where they are recording their paycheck and as an expense and that shows up under profit and loss that's incorrect your paycheck as a self-employed DBA or single-member LLC is not an expense to the business it's a distribution of money and so it's going to be recorded on the balance sheet as an equity distribution so don't fall into that trap so summarizing everything up you want to pay yourself a consistent amount out of your business checking account moving it to your personal checking account the amount is going to be consistent with your net income or percentage of revenue or some combination of the two in the next couple videos I'll be transitioning and talking a lot about paying yourself as an s-corporation a single member S corporation or and how the tax ramifications of making that change could be advantageous to you so more to come on that stay tuned so if you like this video please consider subscribing and hitting the bell at the bottom so you can get the latest and greatest Universal bookkeeper tips and tricks that are coming out on a regular basis

Channel: Universal Bookkeeper

Views: 7,735

Keywords: dba, distribution from business, how much to pay yourself, how much to pay yourself small business, how to pay yourself, how to pay yourself as a business owner, how to pay yourself as a dba, how to pay yourself as a sole proprietor, how to pay yourself as an llc, how to pay yourself from your business, how to pay yourself llc, limited liability company payroll, llc, owners draw, pay yourself, profit first, single member llc, single member llc s corp, small business owner

Id: 6sS0ssKoq0w

Length: 4min 48sec (288 seconds)

Published: Thu May 07 2020