Setting your own salary: from payoff to premiums

If you own a small business, how do you pay yourself? Do you take home a pre-determined salary, or maybe a percentage of the profits? What if your business is not yet profitable? It's important to have a plan in place, especially when you're just starting out, otherwise you might find yourself collecting whatever's left after the bills are paid, or nothing at all.

There are a few things you should consider when deciding what to pay yourself:

As a sole proprietorship or a partnership, the income you receive is considered to be personal income for tax purposes. However, if you register as a corporation, you have other options for paying yourself, like wages, management fees, and dividends. Learn more about these options by reading about the forms of business structure.

Because there are so many things to consider, you may want help managing your finances.  You can seek professional advice from an accountant, financial planner or tax lawyer. Be realistic, but don't be afraid to reward yourself. A bit of sacrifice early on may allow you to enjoy greater success in the future.

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