Some landscape contractors dedicate a portion of the payroll to themselves every week. Others use the money from the account as needed. Budgeting for yourself is one of the key pieces to running an efficient company. These LawnSite members discuss why it’s important to pay yourself a salary, even as the business owner.

NunnL&L: Do you cut yourself a check every week, and why? If the money runs through your account, isn’t it yours?

southerntide: I don’t cut myself a check. And yes, it is your money. I just leave it and spend it on work stuff. I use a DBA, though, and am also solo, so most of my other expenses, like insurance for vehicles, I also have for work. Internet, etc., is a write off anyway so no need to pay myself, then pay those bills.

I buy a monthly binder for each new year and keep all receipts, invoices and deposit slips in it. I also use my online banking with categories for everything and list them accordingly with written descriptions. When tax time comes, all I do is print off yearly bank account information and take my binder to the accountant. Everyone does this different, though, so listen to suggestions for what works for you.

wheatus: It all depends on how your company is structured. It may be your money or it may be the company’s.

snomaha: I’ve been in business for 25 years and the one thing I would do different starting out is value my time. Placing a fair market value on your contribution to the company forces you to be a better business. You get paid for the job you do – you get a return on what you own. Getting past the illusion of what’s leftover is profit without plugging in a fair market wage makes your numbers worthless.

JFGLN: Yes, I pay myself just like an employee, including most of the payroll deductions. I also take a monthly dividend payment, which is a share of the profit. Keeps my books nice and clean. At the very least you should have two separate checking accounts.

FGLN: Yes, I pay myself just like an employee, including most of the payroll deductions. I also take a monthly dividend payment, which is a share of the profit. Keeps my books nice and clean. At the very least you should have two separate checking accounts.

JeremyKuhn: I run my company LLC as an S corporation and pay myself a salary. Then, if I take a draw above the salary, it is taxed differently than it would be as a sole proprietorship.

Quick Clips

  • Lower revenue means minimal overhead and the owner usually does a majority of the work, so salary percentage can be higher. Higher revenue, near $500,000, will require a lower percentage because of the increase in overhead costs.
  • Cash flow will get tight if you don’t understand your numbers (like profit and loss statements and gross profit margins) and decide to pay yourself whatever salary you want.
  • Don’t make the mistake of hoping there is some money left for you after bills are paid. Make sure you are factoring in a salary for yourself as part of your business structure.
  • Working year-round offers a steadier income and therefore a dependable income stream from which to budget a salary. If you change your pay during your slow season, be wary, the IRS frowns on irregular businessowner payments, especially after a business has become more established.
  • The first rule of factoring a salary for an owner is creating a realistic budget for the upcoming year — and making the salary a part of it.
  • Some business owners opt for a lower salary since they factor in total compensation, such as benefits that are company expenses, like health insurance, computer, cellphone, vehicle insurance, etc.

—Terry Delany, owner of GroundSERV and Davis+Delany, based in Fayetteville, Arkansas