How Much Should Entrepreneurs Pay Themselves?

When you’re an entrepreneur, you’re on your own. You make all of the business, hiring, and strategic decisions. You also have to decide how much to pay yourself, which can be a tricky decision to make. 

Some entrepreneurs pay themselves hardly anything — consider Facebook CEO Mark Zuckerberg or Twitter CEO Jack Dorsey who pay themselves about $1 per year. But chances are you should pay yourself more than this to show the IRS you’re a legitimate business, understand the true costs of running your business, and avoid burnout.

So, what’s the magic number? There’s no right answer, but there are a number of best practices. First, you’ll want to decide if you should pay yourself via a draw or a salary. There are significant tax and accounting ramifications of each. 
Fundera created an infographic with factors you should consider when deciding on the right entrepreneur salary.

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Nathan S. Gibson is an independent worker compliance business partner who provides expertise and creative solutions to enhance workforce flexibility and maintain compliance with worker classification requirements. He helps mitigate the risks associated with the misclassification of self-employed consultants, freelancers and independent contractors.

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