Incorporating my lawn care business and how to pay myself.

When you are running a basic sole proprietor business, it is pretty easy how to pay yourself. Basically anything left in your bank account after expenses and taxes is yours to do what you want with. If at a point you decide you want to incorporate your lawn care business, how do you then pay yourself? The process is a little more complicated but, well worth it as you gain more benefits from being incorporated. Let’s have a look as to how to do this from the Gopher Lawn Care Business Forum.

One entrepreneur owner wrote “I incorporated my lawn care business last year from a dba and I am now unsure of how I should pay myself? I am set up to have employees so I am wondering if I should just add myself as an employee? Should I just take money out and do a journal entry in my accounting?

The reason why I decided to incorporate my lawn care business was because I wanted to protect my house just in case an accident happened while I was working I thought it was important to protect my personal assets and I got a commercial lawn mowing account so I also purchased a general liability insurance policy of $2 million.

Now that my company is growing, I’m going to need some help with my commercial mowing account so I will need to hire an employee. I want to be legit and grow my company to the best of my ability. Also I incorporated my lawn care business myself online and did not need a lawyer or an accountant.

Incorporating my lawn care business and how to pay myself.

Incorporating my lawn care business and how to pay myself.

Last year I bought all my mowing equipment I needed with all the profits I made from the business. This year I would like to show myself the reason why I do this to make a profit and put some money back into the bank. Where I am at now I am having a blast with this business and love what I do. But if I plan to take this business full time and quit my regular job I need to figure out how to make some serious money at it.

I understand I need to save for taxes and it’s all on me to do this. But I can’t turn to the wife and say ‘well we will see how much money we have at the end of the year.’ I’m trying to figure out what to do legally. Granted the money I make will be in my business bank account which I own, But I don’t know if I should just do a withdrawal once in a while when I need some cash and I never know what to punch into my accounting software to account for these withdrawals.

So then… Fast forward two years. Let’s say I have no regular job and I am out everyday mowing lawns and my house payment is due. My business bank account has about $10,000. I have built that amount up after 2 years and I am showing a profit in my accounting software of about $2,000 a month after expenses and my business bank account is growing. Should I be on the payroll as an employee? Some of you might say to take a small salary. Is that how you pay your bills if you’re doing this full time?

Thanks for all the answers. Everyone’s unique take on this helps me as I figure out how to grow my business!”

A second lawn care business owner responded “I have an LLC and my accountant told me to just pay myself as if I were an employee. My wife actually writes the check. At first it felt weird writing a check to myself, but now I see how it makes sense. I pay myself a salary just like any other employee. I withhold taxes, medicare, and SS. The way the accountant explained it to me was that the LLC is it’s own entity and even though I am an owner, I am still an employee of the LLC, if I am going to get paid.

I also incorporated my lawn care business online at my state’s website. It was pretty easy but cost a little more than I thought it would. In my state an LLC is subject to a franchise tax as well, but like you I thought it was smart to separate and protect my personal property from any potential lawsuits. For me it’s a lot easier to let an accountant worry about the taxes though, I don’t care for that part of the business.”

A third business owner said “I pay my personal bills with my salary just like I would if I was being paid from a job. My house payment, car payment, groceries, electricity, cable, daycare, cell phone….My business is completely separated from personal. As far as payroll deductions I use my accounting software and it figures out my payroll. I pay the government once a month on their website and file Form 941 every quarter.

To be legal and be a ‘real’ business, you need to treat it like one. Even though you are the owner of the company there is a worker….YOU. You are the employee. Just like any other business they pay their employees by the hour or with a salary.

If you haven’t already done so, create a personal budget,( mortgage, utilities, groceries, credit debt, play money, etc.) Total it all up and see what you need to cover your monthly bills. Divide that monthly figure by 4 weeks and pay yourself that amount every week.

If you have an accountant, ask them to give you the numbers you need to figure out what has to be set aside for SSWT (Social Security Tax Withheld), MWT (Medicare Tax Withheld), FWT (Federal Tax Withheld), and SWT (State Tax Withheld).

Keep in mind, your business and you (personally, the employee) share the responsibility of the SSWT and MWT, meaning the business pays half (write off) and you pay half.”

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