Three Tips To Consider If You're Not Paying Yourself A Salary In Your Business
Starting a new business is a full-on exercise in both time and expense. As a first-time business owner, you are proud that you are no longer working for someone else, but until your business starts making money, you are thinking about forgoing paying yourself a salary. Before you proceed further with that concept, here are three points to consider when debating whether to pay yourself a salary from day one of your business operation.
You Are A Valuable Talent
A business owner wears many hats, particularly when the business first begins and it is often a one-man band. The talents that you bring to this business are immeasurable and extremely valuable. After all, without you, the business would not commence operations in the first place. Therefore, it is critical that you recognize your talents and pay yourself for them. You would not add a new talented person to your staff and not pay them, so why would you not pay yourself?
Think Carefully About Salary Amount
There are two main factors to consider when you are deciding how much to pay yourself. These are:
- What would it cost to hire a manager to replace you if you could not work for a while
- If you take the proposed salary and divide that by the number of hours you put in, would it at least meet the minimum hourly wage?
Nobody expects that you can pay yourself a millionaire's wage in the first few months of trading, but you should be realistic about at least paying yourself more than the minimum wage. If necessary, increase the price of your products or services so you are making that minimum amount. Otherwise, you will quickly find yourself struggling to pay your own bills if you undervalue what you are worth.
Remember Your Superannuation
Finally, once you do decide to pay yourself a salary, remember that you also need to pay 9.5% of that salary amount into your superannuation fund. You must, legally as an employer, pay this contribution quarterly. While it may seem like an extra expense you would like to ignore, when it is time to retire you will be glad you made those payments.
If you have any more doubts or queries about the pros and cons of paying yourself a salary, discuss the matter further with your accountant. They have all the information you need about commercial accounting to help make an informed decision on this matter.