Create Self Employed Invoice for Enterprises Effortlessly

Self employed invoice for enterprises

hi everyone I'm attorney Aiden Durham with 180 Loco in Colorado welcome back to all up in your business where today I'm going to give you a few tips when it comes to paying yourself from your business or your LLC before we get into all that please do subscribe if you haven't already done so click that little bell so you get notified anytime I post a new video and check the description for links to additional information and resources and while I am a lawyer I am not your lawyer the stuff I talk about in this video should not be taken as a substitute for legal advice because it's not if you need help with any legal matter you should consult with a lawyer who's licensed in your state so for most of us maybe not all of us but I believe most of us we probably get into business and we form our business form our LLC because we want to make money sure we might have some other altruistic purposes we want to help people we want to do good in the world that's great that's great but we still need to support ourselves and earn money for ourselves and and when it comes to paying yourself from your LLC or from your business there are a few things that you can do that can kind of really screw it up so my first tip for paying yourself from your business is keep in mind how your business is taxed if you're formed as a single member LLC and you're not taxed as an S corporation or even a multi-member LLC not taxed as an S corporation it's basically as if the LLC doesn't exist if I'm a single member LLC I'm taxed as a sole proprietorship under the IRS an LLC isn't a it isn't an entity type that the IRS really recognizes llc's as a single member are taxed as Sole proprietorships and as multi-member llc's they're taxed as Partnerships and whether sole proprietor or partner it's taxed at the individual level there's no corporate tax there's no business tax for an LLC and so what that means is that you're going to pay taxes on your business's income regardless of how much or how little you've paid yourself let's say my business as a single member LLC has a taxable income of a hundred thousand dollars and I paid myself maybe fifty thousand dollars it doesn't matter that I've only paid myself fifty thousand I have to pay taxes on all hundred thousand of that income I don't think anyone can see you bye Rocky so keep that in mind when when you're paying yourself uh don't get bogged up don't get stuck in the weeds of oh if I pay myself too much am I going to have to pay more taxes no you're not going to the taxes are going to be the same regardless of how much or how little you've paid yourself that's not the case necessarily if your business is taxed as an S corporation then it does kind of make a difference but if you're not Pax in the S Corp it doesn't matter a little tap dancer my next tip is to pay yourself either by writing a check or doing an account transfer you can technically pay yourself however you want to there's no like rule about how the method that you're supposed to use to pay yourself from your business you can write yourself a check you can do an account transfer you can withdraw cash and deposit that if there are I guess the Bitcoin you can pay yourself however you'd like whatever method you want to but we are going to want to be able to look back in our records and see what was a member distribution versus maybe an expense that is a deductible expense because member distributions that's the word or member draws that's the term for when we're paying ourselves those aren't deductible expenses it's not like a payroll expense because again tax wise they don't they don't care they don't care that you're paying yourself that so for the purposes of bookkeeping and filing taxes and just knowing how much you've paid yourself I find it's easiest to do that if you're writing yourself a check so then you can put a memo on it so it's you know member distribution or if you do an account transfer like an ACH transfer usually you can put a little memo on that says member distribution so then when you go to file your taxes or when you're looking through your records you'll know oh yeah this was when I distributed some of that profit to myself tip number three is don't forget to save for taxes we're not employees of our business unless we're taxed as an S corp then we kind of are but if we're not taxing the S Corp we're not employees we're not getting a paycheck we're not getting a W-2 we're not having taxes withheld from our paycheck like we are if we're employee so we have to remember that we're going to have to pay these taxes at some point later on and so we should set some aside and save for that purpose exactly how much should you save for taxes it depends that's it's you know it depends sense there's no strict number to stick to generally speaking between you know 15 to maybe 30 percent of your business's income that is a good amount to set aside for taxes that doesn't mean all of it's going to be paid out in taxes but at least you know even if you overestimate Ellie still have more than enough to pay for the taxes that you have to pay so again if your business has a taxable income of a hundred thousand dollars I wouldn't suggest paying yourself all hundred thousand dollars because you know some of that's going to have to go to taxes and of course some of it's going to be you know I assume need to be kept in the business to continue operating the business so when you are paying yourself make sure you're keeping in mind some of this should be set aside for taxes and finally my last tip and really the most important tip I think is to have a separate bank account that you're paying yourself from more specifically make sure you have a dedicated business bank account and that you are paying yourself from a business account and putting that money into your personal account if you have money from your business deposited directly into your personal account as an LLC and especially as a single member LLC oof that is a big time no no you really put yourself at risk of piercing the corporate veil in that instance so you really must have a separate dedicated business account or multiple business accounts and then you pay yourself from your business write yourself a check from your business account deposit it into your personal account do a transfer from your business account into your personal account do not put all of your business money into your personal account and that's it that's bad and you don't have to stop at just one account you can have multiple accounts I personally what I do I have a handful but I have an operating account that's where my income the call my client when people pay me that money goes into my operating account and that's where I pay for my business expenses comes out of that operating account then I have a separate savings account where I put some money to save for taxes and then I have another checking account that's my owner's compensation account and that's where I put some money that is specifically reserved for me to pay myself with you don't have to do it that way you can't have just one account and remember you know maybe I have to save this much for taxes I can pay myself this much but yeah make it easy on yourself have separate accounts if you'd like and make it easier on yourself and make sure you have a bank that is going to make it easy for you to pay yourself like if you're if you want to just transfer money when you're paying yourself but your bank charges you for ACH transfers that's not going to be ideal maybe find a bank that doesn't charge for those types of transfers and there are a lot of banks out there now that are offering multiple accounts or kind of sub accounts within one main business bank account so you can have as many different accounts as you want one for taxes one for paying yourself one for saving for fun stuff you can have as many accounts as you'd like and you can use them for whatever purpose you want check the description because I've got a few banks that I'm familiar with and that I've worked with that I really like for this purpose that make it super easy to just operate your business generally but also to pay yourself and help with kind of allocating some of your income for taxes and paying yourself and everything in between so check the description for more info and there you have it folks so overall the how of paying yourself is you can pay yourself however you'd like for the most part but in doing so we want to make sure we're saving for taxes we want to make sure we're going to be able to remember that we paid ourselves in that method or on that date and we're going to want to make sure we're not putting our own liability at risk and risking piercing the corporate bail with co-mingling and mixing our personal and our business assets if you learned a thing or two please go ahead and give me a thumbs up and don't forget to subscribe if you haven't already done so click that little bell so you don't miss another episode of all up in your business and don't forget to check the description for links to additional information and resources I talked a little bit about s Corps and how it's a bit different if you're paying yourself from an S corp if you are taxed as an S corp or you'd like to be and you're wondering wait how do I pay myself in an S corp I've got a video talking all about that of course you can check that out right here I'll meet you over there thank you so much for watching I'm Aiden Durham and I'll see you next time