Should I Pay Myself a Salary From My Business? Unless you have other income streams, yes, you should.

By Rosalind Resnick

Opinions expressed by Entrepreneur contributors are their own.

Q: I started my business last year, and it's beginning to make some real money. Should I pay myself a salary or reinvest the money back into the company?

A: Unlike our friends and neighbors in the corporate world, entrepreneurs like us generally don't work for a paycheck. What gets us up in the morning is the desire for financial freedom, personal fulfillment and the hope that, one day, that sapling we've nurtured all these years will grow into one very valuable tree. That said, the bank, the power company and the supermarket probably don't share our entrepreneurial dreams.

That's why, unless you have investments or other income streams, you'll probably want to start paying yourself a salary from your business as soon as your company can afford it. You need to recognize that your company is a business, not a hobby, and that its goal is to make a profit.

"You should not be building a business if the model does not lead to sustainable operating income and cash flow out of which a salary can be taken in a reasonable period of time," says Frances Spark of Spark Consulting LLC, a New York firm that provides business consulting, operational restructuring and interim CFO and COO services to entrepreneurs and small to mid-size companies. There are also taxes to consider.

"If your business is structured as a sole proprietorship or an LLC, you are probably better off taking distributions from the company and paying taxes on an estimated basis during the year," Spark says. "If you have employees, you will have to set up a payroll and ensure that you withhold and pay the necessary employment taxes to the IRS."

Rosalind Resnick is a New York-based freelance writer, entrepreneur, investor and author of The Vest Pocket Consultant's Secrets of Small Business Success.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Leadership

Is AI Worth the Layoffs? Inside a CEO's Ethical Nightmare

AI-driven workforce cuts are spreading across major corporations such as Amazon, Microsoft, IBM and Walmart. But for smaller business CEOs, it's not just strategy — it's deeply personal. How do you tell employees you consider friends that AI might replace them?

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Business News

Nvidia CEO Says '100% of Everybody's Jobs Will Be Changed' Due to AI

Nvidia CEO Jensen Huang says AI will transform how people get work done.

Leadership

Most Entrepreneurs Approach Culture the Wrong Way. Here's What They're Missing.

Entrepreneurs who treat culture as an add-on rather than the foundational context that shapes all business rules and behaviors are setting themselves up for failure.

Starting a Business

'Consumers Deserve Better': How Superstar QB Patrick Mahomes Is Brewing a Better Future for Coffee Drinkers

Backed by lead investor and 3-time Super Bowl champion Patrick Mahomes, Throne SPORT COFFEE is disrupting the $5B ready-to-drink coffee market.

Business News

Google Swoops in to Make a $2.4 Billion Deal With a Startup Previously Promised to OpenAI

Google is hiring the startup's top leadership and paying for licensing rights.