Thursday, May 24, 2012

Do Self-Employed People Have to Write their own Paychecks?

So you've finally started your own internet business. You've printed some fliers, or perhaps created a webpage. Better yet, you've found customers! Money is starting to flow in. Sure, probably not a bunch, but some money beats no money at all, right?

a lot of people will be thinking of right now is how to continue to advance their business. Once you start the profit stream, how do you make it into a river? But that's not the only thing that you should be thinking about.

Yep, I'm talking about
taxation, and paperwork, and planning, and all those other things that are required to keep a business running smoothly. If you've finally found the golden goose, you're probably not thinking much of hiring an accountant. After all, just how much paperwork is necessary, anyway? For instance, do small business owners have to write themselves paychecks?
Just like the rest of these paperwork questions, the devil is in the details. First, certainly, you need to pay your business expenditures out of the money you've made. Once that's looked after, generally, the remainder is profit. So yes, you should write yourself a paycheck out of that profit. When you can.

However you don't always have to do it that way. Many self-employed people pay themselves
an incentive from time-to-time, perhaps in exchange for landing a new contract. You may also decide that some sort of company-related (but also fun) travel might be required. As owner of the small business, you have a primary responsibility to tend to the business, and things like classes or bonuses can be a great way to keep yourself encouraged and things moving along.

The IRS takes a dim view to
too much of this, however. So your best bet is to use some form of online system for creating your paycheck stub. (It used to be you should find a local bookkeeper, but nearly all of those services are being maintained on the net these days)

key for many business owners is selecting just when to pay themselves. If you have a cyclical business, where you might make loads of money one month and not as much the next, a good thing to do is probably hold back your profits until the next month so that you can handle your business expenses first before writing yourself a check. Of course, this is a lot easier said than done, and a lot of businesses have very unpredictable income streams that make planning for things like payroll almost impossible. Once again, an online system lets you select how you want to do it, whereas if you contract out with a neighborhood accountant they're going to want some sort of standardized plan of service.

certainly not something you can just ignore, as taxes and penalties escalate quickly and you could end up going out of business because the federal government takes all you have.
Whatever you do, expand your business first. As the old saying goes, you can deal with a lot of problems with more sales. Concentrate on building the machine that is your business, but additionally keep a very watchful eye on all the paperwork demands too, because they can come and nip you in the rear if you aren't very careful.

Remember: paperwork is important, so let somebody else do it. Keep your eye on sales. Here's a little sales primer.