Sole Proprietor How to Pay Myself

[Jcamarse]

I am a custom furniture maker and am at the point where I'm done putting all profits back into the business and would like to know the best way/format to pay myself (revenue up to now has remained in business accounts to manage startup costs). Should I create my own pay stubs with soc sec. and medicare taken out as a formality then just transfer my pay from my business accounts? I was just wondering what best/standard practice is for a one-man operation.  (Sole proprietorship based in Texas)

[MartyG]

Hi Jcamarse,

As a sole proprietor, your business is considered part of your individual return and reported on Sch C.  With a Sch C business, you can pay yourself any time with absolutely no reporting required.   The IRS collects its tax from a Schedule  C through income (based on the Sch C income plus other personal income) and through self employment tax (approximately 15.3% of the net income of the Schedule C each year).  So paying yourself is just a matter of taking the money out of the bank.  End of story.  DO NOT pay your self a salary with withholding, social security, etc.  The IRS frowns upon this and all it creates is confusion and useless complications.  Just take the money out of the bank, no reporting, and you are done!!