Starting a business is one of the most constructive ways to generate a lifetime of revenue. One excellent business idea, or one hardy product prototype and you can bring in a six figure yearly sum in good time. If your career goals and your financial goals align, this is one of the best ways to reach it.
But once your business is successful, it can feel incredibly complicated to combine your business and personal finances in a safe way. How do you pay yourself as a business owner, fairly and without overindulging? It’s an easy mistake to make, so let’s go through some tips below.
Deciding on Your Salary
This is dependent on the kind of company you own. If you’re simply self employed then everything goes back to you, but if you’re running a full blown limited company it’s a little more complicated.
You’ll need a yearly salary here, which you can then substitute with regular dividends once you start making a good profit. You might want to keep the salary small for the meantime, to ensure there’s plenty to go back into the business, but this can increase by incremental pay rises over time.
Figure Out the Taxes Early
Tax can be a scary thing when you’re running a company by yourself! There are many rules and regulations to follow, and if you’ve never calculated your own tax before, opening up an accounting page can feel impossible! But if you do your research early on, and even think about investing in a freelance accounting service, you can keep your head about you.
Outsourcing your tax needs is a good way to get a handle in the uptight and stressful early months. But be sure to walk through the necessary steps yourself too. At the moment you’ll probably only need to pay income tax, but in the future you’ll likely need to think about employment taxes as well. Be sure to check both the federal and state requirements for these.
Think About Insurance for Long Term Stability
There’s no telling if your business will always be successful. That’s why it’s best to live as moderately as possible in both the early and the later days. The profit lines may shift and move and even dry up as time goes on, and you don’t want to be caught short. A savings pot is one thing, but a concrete guarantee is another entirely.
As such, you may want to look into insurance as a way to provide a safety net, in case something does happen. Whether you’re unable to run the business anymore or the product lines themselves fail to innovate, you can use advice from people like Shawn Meaike to foresee the trouble and make preparations for it.
Business success means a lot of things for your personal finances. Namely, they’ll never be the same again! Make sure you pay yourself right, pay your taxes right, and have a long term plan to keep things secure.