Own & operate a kettlebell gym, how do I calculate my salary?
I have been just taking what I need for personal bills, should I be more exact with my salary?
First thought that pops into my head, is are you a sole proprietor, or corporation?
If you are a sole proprietor (non incorporated) then you cannot pay yourself payroll, and any monies taken out of the business is deemed to be an 'owner draw' and is deducted from your equity account.
A partnership would be the same as a sole prop for this discussion.
If you are incorporated (C-corp or S-corp) you should, yes, assign yourself an annual salary. Something you think your business income can handle, and remember to deduct and pay payroll taxes and pay unemployment taxes too.
Let's say your gym brings in $5000 per month, and your expenses are $2000 per month, that leaves $3000 per month profit. You should calculate your salary out of that, but remember to leave about 20% of your salary amount for social security taxes and unemployment tax. And you want a little wiggle room for some profit.
The IRS has been targeting S-corp owners that do not pay themselves payroll, so everybody should be aware of that.
If you are an LLC, you made an election to be treated as a sole prop, partnership, or corporation, so follow the instructions based on that.
If you need help with payroll, I'd be happy to help.
Thanks and keep reading Jessie!