How to Pay Myself Under a Sole Trader
- 1). Calculate net profit before paying yourself for your service and work within the business. Come up with two figures: net profit and withdrawals for personal purchases.
- 2). Engage in a practice referred to as "cash budgeting." Calculate how much money your business needs to cover your current and near-future expenses, such as inventory costs, rent and insurances. Subtract this figure from net profits.
- 3). Allocate some revenue for improving your company. Evaluate the cost of launching new products and initiating marketing campaigns. Subtract a specific dollar amount from the figure you calculated in Step 3.
- 4). Calculate your expected tax obligation. Assume your tax bracket is 30 percent to be on the safe side if you don't know the exact figure. If, for example, you want to pay yourself $1,000 in salary, deposit $300 into a tax savings account to cover your tax bill.
- 5). Withdraw your salary from a business account. Mark each check for identification. Include your full name and the pay period for which you are receiving compensation.
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