You love the freedom and flexibility that comes with being self-employed.
One thing you don’t quite enjoy as much?
The mountains of paperwork that you have to sort through, register, and properly file without any help.
You’ve downloaded the right tax software, you’ve properly registered your business, and you’ve even managed to make great profits in your first few months of business.
Now, you just need to know how to pay yourself.
Read on to learn the top tips for self-employed payroll.
Determine Your Salary
Paying yourself a salary when self-employed means that you’re in total control of how much you earn.
So, before you can set up a self-employed payroll, you have to determine your salary.
A good rule of thumb is to pay yourself no more than half of your profits. If you’re still growing your business, consider paying yourself somewhere between 20-30% of profits.
This is so you can invest the rest back into your company.
you may find it helpful to network with other self-employed people in your industry and ask how much they pay themselves compared to their gross income.
Remember that when you start generating even more revenue, you can always give yourself a raise.
Finally, be certain that you’ve taken expenses and overhead costs into account when determining your ideal salary.
Decide How to Calculate Your Income
When you’re deciding how to handle your self-employed payroll, you also need to consider the way in which you want to calculate your wages.
Do you want to pay yourself a flat salary every year, with a monthly payment?
Or, would you prefer to manually track your hours, and then use self-employed payroll software to help you pay yourself according to the hours you’ve worked?
If you’re just getting started, know that it’s easier to justify an hourly self-employed wage to the IRS than an annual salary.
Create Pay Stubs
Now, you’re ready to create pay stubs for your self-employment payroll.
You can use a pay stub generator to make the process much easier. You’ll be able to clearly see the amount of taxes owed, any business expenses, your gross pay, and much more.
If you simply don’t want to handle the stress of managing your own payroll, you can also hire a self-employed payroll service to take care of it for you.
Having pay stubs and a clear record of your income and expenses makes tax time much less of a headache.
Managing Self-Employed Payroll Is Easier Than You Think
Keeping diligent records and relying on the right tools and software when you need to makes self-employed payroll much less of a chore.
Thinking of hiring employees for your company and curious about how that will change the structure of your business and fiscal responsibilities?
Our blog has all the advice you need to succeed as a business owner and make smart choices for your company.
Read our blog post first thing in the morning, so you have great ideas about how to balance your company’s budget all day long.