One question many entrepreneurs ask is this: How do I pay myself as a small business owner?
Whether you are a freelancer, a sole trader, or managing a small team, paying yourself properly is essential. It keeps your personal finances on track and helps you manage your business cash flow more effectively.
This guide walks you through the process step by step. No complicated jargon. Just clear and practical advice.
Step One: Separate Your Business and Personal Finances
The first step is simple but powerful. Open a separate bank account for your business.
This helps you:
- Track income and expenses clearly
- Avoid mixing business spending with personal spending
- Make tax preparation far easier
Keeping your finances separate sets a solid foundation for everything else.
Step Two: Choose a Pay Schedule
Treat yourself the same way you would treat an employee. Set a regular pay schedule. Even if you are the only person in the business, this helps with:
- Budget consistency
- Financial discipline
- Better control of cash flow
Examples include:
- Paying yourself every two weeks
- Paying yourself monthly on a fixed date
Consistency matters more than the frequency.
Step Three: Decide How Much to Pay Yourself
When deciding how much to take from the business, ask yourself:
- What are your personal financial needs?
- Is the business generating enough profit to support this amount?
Start with a manageable figure. As the business grows and stabilizes, you can increase your pay gradually.
Step Four: Transfer Money the Right Way
To pay yourself properly:
- Move funds from your business account to your personal account
- Label the payment clearly in your records as something like Owner Pay or Owner Withdrawal
- Record the payment regularly to keep your books accurate
You do not need payroll software unless you operate as a registered corporation or are paying employees.
Step Five: Plan for Taxes
As a business owner, taxes are your responsibility. No one is withholding them for you.
Plan ahead by:
- Setting aside twenty to thirty percent of your income
- Making estimated tax payments quarterly if required
A simple accounting tool like Built can help you track your income and calculate how much to set aside for taxes.
Step Six: Keep Your Records Clean
Even if you are managing payments manually, stay organized.
- Track all income and expenses
- Log each payment you make to yourself
- Monitor your cash flow often to stay informed
Using bookkeeping tools can automate much of this and ensure accuracy. Clean records are essential for decision making and audit readiness.
Summary: Paying Yourself the Smart Way
Here is a simple checklist:
- Open a business bank account
- Set a consistent pay schedule
- Decide on an affordable amount
- Transfer the money from your business to your personal account
- Record and label the transaction
- Set aside money for taxes
Following these steps will help you keep your business healthy and your personal finances stable.
Bonus Tip: Do Not Hesitate to Pay Yourself
Many small business owners feel guilty about taking money from their business. But remember, you are your business’s most valuable asset.
Paying yourself keeps you motivated, prevents burnout, and builds sustainability over the long term. You are not draining your business. You are investing in its most important resource—you.