Why charge a salary to the business?
Posted: Sun Dec 22, 2024 9:44 am
Have you ever had a hard time separating business money from family money? Many entrepreneurs find that money gets mixed up, and in the end they don't know which money is from the business and which is from the family. The problem with mixing money is that when the business is doing well, then we enjoy it with the family. But when the business is doing badly, then we have to tighten our belts on family expenses. One of the best practices to separate business money from family money is to withdraw an entrepreneur's salary.
Because an entrepreneur works for his business, and that work deserves payment.
Because if an entrepreneur is unable to earn a salary from the business, then he could philippines business mailing list always go back to working as an employee, and still get paid a salary. Why not demand a salary from a business, if you would demand one from any other business?
Because many times the entrepreneur is not only a businessman, but also a sales manager, production manager, cleaning manager, secretary, accountant, distributor, publicist, etc. All this work costs money.
Because when entrepreneurs don't have a fixed salary, they spend it all when the business is doing well. But when the business is doing badly, then it is the family that is harmed because they have no way to pay their bills.
Access to medical leave (although this also requires payment of AFP).
In many cases there are tax benefits to withdrawing the “profit” from the business as a salary (the salary is a business expense, so it does not count as a withdrawal of profits).
Ok, you convinced me, but… it doesn't give me a salary!
Many entrepreneurs have told me that they see it as impossible to withdraw a salary. But sometimes they change their mind when I ask them the following question:
Can you live on what your business makes you?
If the answer is yes , then it is certainly possible to withdraw a salary. You just need to be organized. Calculate how much you get on average from the business, and that should be your salary. It should be enough! Because you just answered yes, it is enough to live on. Every month you should withdraw the same amount. In the business you will have good months in which you will save the profit. But you should not touch that money, because it is not yours! It is the business's money, which you should not take out because you already had your salary. When the business has bad months, the loss can be absorbed with the savings that the business had saved. The business's savings can also be used to invest better in it.
If the business still doesn't leave you enough to live on , then you can start with a "small" salary, and find other sources of income in parallel, until you manage to grow the business.
Because an entrepreneur works for his business, and that work deserves payment.
Because if an entrepreneur is unable to earn a salary from the business, then he could philippines business mailing list always go back to working as an employee, and still get paid a salary. Why not demand a salary from a business, if you would demand one from any other business?
Because many times the entrepreneur is not only a businessman, but also a sales manager, production manager, cleaning manager, secretary, accountant, distributor, publicist, etc. All this work costs money.
Because when entrepreneurs don't have a fixed salary, they spend it all when the business is doing well. But when the business is doing badly, then it is the family that is harmed because they have no way to pay their bills.
Access to medical leave (although this also requires payment of AFP).
In many cases there are tax benefits to withdrawing the “profit” from the business as a salary (the salary is a business expense, so it does not count as a withdrawal of profits).
Ok, you convinced me, but… it doesn't give me a salary!
Many entrepreneurs have told me that they see it as impossible to withdraw a salary. But sometimes they change their mind when I ask them the following question:
Can you live on what your business makes you?
If the answer is yes , then it is certainly possible to withdraw a salary. You just need to be organized. Calculate how much you get on average from the business, and that should be your salary. It should be enough! Because you just answered yes, it is enough to live on. Every month you should withdraw the same amount. In the business you will have good months in which you will save the profit. But you should not touch that money, because it is not yours! It is the business's money, which you should not take out because you already had your salary. When the business has bad months, the loss can be absorbed with the savings that the business had saved. The business's savings can also be used to invest better in it.
If the business still doesn't leave you enough to live on , then you can start with a "small" salary, and find other sources of income in parallel, until you manage to grow the business.