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20 Replies Last post: Feb 7, 2008 12:19 AM by Manoj Gupta

First year of the business, Should I pay myself.

Nov 1, 2009 8:03 PM

Click to view santaclara's profile Start-up santaclara 1 posts since
Nov 1, 2009
This is the first year of my business. I have a S-Corp business. This year being my first year I didn't make any profit (gross revenue = total operating expenses). Should I pay myself this year or not.
Example I made 102,000 gross revenus, total employee payroll is 60,000, rent etc.. 20,000 and marketing etc..20,000 ( net profit 2,000)
Should I pay this year for myself (If I payself the busines is in loss, If I don't pay myself profit)
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Click to view UncleLeon's profile Authority UncleLeon 17 posts since
Oct 26, 2009
1. Re: First year of the business, Should I pay myself. Nov 2, 2009 12:00 AM
in response to: santaclara
First, let me qualify this reply by saying that I am not an accountant. I believe that you should discuss this with your accountant. But, here's my opinion:

Whether, or not the business can afford to pay you a salary, I believe that you should set a reasonable salary for yourself and pay yourself at regular intervals, just as you do your other employees. If the business can not afford your salary, simply lend funds back to the business.

Why all this confusion of handing funds from one pocket to the other? Good question. (I'm glad you asked.)

By doing this, you have record of the funds you have put into the business,either as an investment, or as a loan. The only way to know the true profitibility of the business is to draw your salary. When the business has grown adequately, pay yourself back the funds you have lent it.
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Click to view phanio's profile Mogul phanio 483 posts since
Apr 7, 2009
2. Re: First year of the business, Should I pay myself. Nov 2, 2009 3:51 PM
in response to: santaclara
You should pay yourself something - even if it not cash - maybe pay yourself with a day off or something. But, even that most businesses don't survive very long - usually do to poor cash flow - you might be better off plowing those funds back into the business to take advantage of new opprotunities. The idea is to leverage those funds into ten times that amount next year.

Plus, think about what you really want down the road. I am sure that in ten years or so, you want you business to be very successful - to the point that you do have to work so hard at it - This is termed the thunder stage of business. At this point, you should be able to take out of the business all that you want. So, a little more sacrifice now - will really pay-off in the long run.

Business Money Today
www.BusinessMoneyToday.com
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