You’ve been working hard to improve your cleaning service business. Congratulations! Now that your company has income coming in, here’s a question you may have: How do I (the business owner) get paid? Do I add myself on with the payroll company or do I just make a business check out to myself?
Yes, you could be added to the payroll and get paychecks, but you could also take money out of the company via a distribution – sometimes also called a “draw” which is non-taxable income. Also, if you put money into the company to get it started, you can pay back that money to yourself, so there are a variety of options.
The first question that must be considered regarding payment for the owners is the entity structure. Are you a DBA, an LLC, or a corporation and if either of the last two, does the company have shares? When you set up the chart of accounts for the company’s bookkeeping did you contribute equity to get the company stared, and if so, how was that booked?
I cannot emphasize strongly enough how important it is that you get an accountant (CPA preferred) or a bookkeeper (preferably a “full charge” bookkeeper) to handle the company’s finances. As you continue to build, grow and improve your cleaning service business, you’ll have less time to spend managing the financial aspects of running your company. This becomes increasing important once you start paying yourself or if you elected to set up your company structure as a DBA. A small (working from home) bookkeeping person shouldn’t charge more than $50-$75 per hour and initially you’ll only need them for about 5 hours or less for set up and then about 5-10 hours each month thereafter.
Have them set up your chart of accounts and explain the various options (and tax consequences) of taking money out of your company. I would suggest that you use Quick Books Pro as your accounting software. It‘s very user friendly and it think it costs about $175 to purchase online. Decide if you or the bookkeeper will do the invoicing and bill paying and then assign someone else to open the mail, bank statements and do the monthly bank account reconciliation.
It’s a good idea to have checks and balances in place so that no one person is handling everything having to do with the money. You should review the financials of the company at least once per month . This normally doesn’t take more than 1 hour and you should review the profit and loss statement, open invoices, accounts payable, the balance sheet and the bank statement. These important safeguards will protect you as you improve your cleaning service business, add new clients and build your company.
Your LLC or Corporation (which I recommend over a DBA) will need to have annual meetings (with minutes recorded) as well as a registered agent, so if you haven’t established a relationship with a small business attorney, now is the time to do that as well.
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