How Do I Pay Myself?
Dave breaks down the best way for Adam to go about paying himself from his small business.
ANSWER: Open a separate checking account as a sole proprietorship under your social security number. For example, Adam DBA (Doing Business As) Adam’s Dog Training School. All the income for that business goes into that account. All expenses for that business go out of that account. The difference is your profit. As you go, you’ll learn what you need to budget for each month and you’ll want to leave that in the DBA account. The rest is your profit.
Then as you pull out your profit, you need to set aside one-fourth for taxes. Start a separate savings account for that money. You absolutely have to withhold on yourself. Failing to withhold is the number one reason that small businesses go under.