Did you know that as a business owner you have the opportunity to hire yourself an employee? Moreover, have you considered the benefits of getting on the payroll as a self-employed business owner?
If you haven’t, it’s definitely time to think about some of the remarkable benefits that you can reap when you start paying yourself a salary. While it may seem redundant at first to employ yourself within your own business, doing so can provide several financial and personal advantages.
Advantages of Being an Employee
Let’s talk about why becoming an employee is beneficial and why you might want to become an employee of your business.
You might believe that because you’re already the owner of your business, there’s no need to designate further roles for yourself. Or maybe you’d love to be able to get away from your business, rather than feeling like it lives in all aspects of your life.
Either way, as a self-employed business owner, you’re definitely going to want to hear about the following reasons why putting yourself on the payroll as an employee can help both you and your business.
1. Separate Yourself From Your Business
Often, business owners get caught up being “The Person” that gets identified with their business. As this person, your identity becomes wrapped up in the company. In essence, you become a living, breathing brand.
But, you can always leave your position and hire someone else later if you can employ yourself in a role, such as:
- Chief Executive Officer (CEO)
- Office Manager
- Or any other title you prefer
This ensures that you can still keep your personal life separate from your business if you wish.
Additionally, designating roles for yourself (and possibly others) within your business will make it easier to sell later.
An excellent way to prepare your business for the future is to make everything formal and in writing. Create a job description list and operation manual for your work.
This way, someone else can fill your shoes later when you’re ready to retire. Or they could even temporarily fill in for you if you’re unable to go in.
2. Clean Budgeting & Book-Keeping
When you make yourself an employee, some aspects of budgeting and book-keeping become clearer. Here are some of the ways that putting yourself on payroll can help you with these things:
● You’ll have a better sense of what you need to make as an employee in regards to your salary, benefits, and taxes.
● In book-keeping, it becomes clear what you are earning in income as a paid employee versus dividends you are receiving in profit as a business owner.
3. Tax Advantages
State and federal governments will tax what you earn as an employee versus as a business owner differently. There is a slight tax advantage to paying these taxes separately rather than solely earning wages as a business owner.
Speak with a tax professional or do some research based on where you live to discover what this could mean for you. Saving on taxes is definitely worth doing a bit of the leg work to figure out how the system is set up!
4. Net Paychecks
If you have a service provider for book-keeping and paychecks, then receiving regular paychecks can make business ownership so much easier. You can better regulate your spending when you give yourself the same salary every week or month.
This is a fantastic way to take yourself off of the income roller coaster. While the business sees ups and downs, you personally won’t when you’re living off of your employee salary.
You’ll be paying your personal taxes automatically every paycheck. However, your business taxes will still need to be quarterly estimates.
If you employ at least 10 or more people, then adding benefits to your employee package might be economical. Benefits could include medical, dental, visual, paid vacation, 401K retirement. And as a formal employee, you’ll also be able to take advantage of these benefits.
How To Put Yourself on Payroll
To make yourself an employee, you do need to create your business within a particular tax structure. We call this structure an S-election, and it can be done as a Limited Liability Corporation/Partnership (LLC/LLP) or a formal corporation.
Be sure to check with an expert such as a tax lawyer to find out if an S-corp election would be the right choice for your business.
Most self-employed massage therapists or bodyworkers would greatly benefit from an LLC. If you are running a large day spa or massage clinic with multiple employees and you want to expand or franchise, then you might even consider a corporation.