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How much do you pay yourself?

post #1 of 8
Thread Starter 

Hi! I'm a small off premises caterer (LLC) and I was wondering what the norm is for paying yourself. what percentage? 30% aftercost of goods. I r don't have a ton of overhead..


Edited by pmd18 - 4/23/15 at 2:43pm
post #2 of 8
You should pay yourself at least what you would pay sn employee to do the same job.
post #3 of 8

I would not state that"I am the only paid employee on the books" in a public forum. I.R.S could be on here also.

Chef EdB
Over 50 years in food service business 35 as Ex Chef. Specializing in Volume upscale Catering both on and off premise .(former Exec. Chef in the largest on premise caterer in US  with 17 Million Dollars per year annual volume). 
      Well versed in all facets of Continental Cuisine...

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Chef EdB
Over 50 years in food service business 35 as Ex Chef. Specializing in Volume upscale Catering both on and off premise .(former Exec. Chef in the largest on premise caterer in US  with 17 Million Dollars per year annual volume). 
      Well versed in all facets of Continental Cuisine...

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post #4 of 8

As a Canuck, and therefore exempt from the wrath of the IRS, I gotta say I never paid myself a dime.

 

We run a clean business, own the small business property, own a modest home, and a 8 yr old Mazda.  Nothing mind boggling, but not owing anything either.  When we have money we pump it back into the business.

...."This whole reality thing is really not what I expected it would be"......
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...."This whole reality thing is really not what I expected it would be"......
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post #5 of 8

I'll offer several thoughts. 

First, you need a good accountant. If you have one and he/she isn't helping you with this, they are not a good accountant. If you don't' have an accountant, go get one now. And your wife, second cousin, nephew is not an appropriate accountant, I don't care what their background is. The accountant should be able to offer you a multitude of suggestions on amortization, depreciation, deductions and all that financial jargon.  

     Second, With one caveat Lagom is correct. You would pay someone to do the job you are doing so you need to get that much. The caveat is that as an owner, you put in many more hours than you could afford to pay yourself at an hourly wage. But you do need to get a salary and not a little one. This is part of the expenses of your business. You do not take your salary out of the "profits". As long as you are not taking a paycheck and subsequently do not have an accurate financial picture of your business you will never have 'profits". 

     As an off premise caterer, your price for any job should include a labor charge to cover the time you spend preparing the food. 

On your next job, keep track of how many hours you devoted to the food prep, ordering, cleaning, bookkeeping, driving, etc. Now multiply that by an hourly rate. 

Does that amount equal a reasonable yearly salary? 

     From personal experience as well as numerous articles I know this is a major flaw in many small businesses. Owners always "pump it back into the business". Years go by because they will "get to that when the business is established". 

In order to have an accurate financial picture of your business, your salary must be included. This is not a hobby. You are working just like anyone else.

     

      your accurate financial picture of your business includes all the costs associated with your payroll. For a long list of reasons, you need to have all employees on the books and accounted for. No exceptions. Quickbooks and other software programs can be a big help and enable you to do quite a lot of bookkeeping yourself. Again, your accountant should be advising you on this already. 

 

     Assuming things go well, the day may come when you wish to sell the business. The figures you present to a prospective buyer should include the salary the new owner can expect. You won't sound smart telling them you never paid yourself. You won't feel smart either. 

post #6 of 8
Yup... If I ever do sell, I'll give the new owners a great deal on the lease.......
...."This whole reality thing is really not what I expected it would be"......
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...."This whole reality thing is really not what I expected it would be"......
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post #7 of 8

I agree with all the above. I'm pretty sure the State you are in will decide how you must file annually.

If deemed a sole owner LLC you will probably have to attach a Sch. C with your 1040. If this is the case, you must keep impeckable

books as @chefwriter says. You have to put a great distance between personal monies and business. Don't be using personal credit cards and checks

to purchase COGS. Or they will have you report as a corp.

I had a LLC 30 yrs. ago and created a corp the following year.

I repeat what chefwriter says. Take my info with a grain of salt!!

 

BTW. 2 things in business.  Pay yourself

                                            Try to max out your SS when ever you can

There is a few things I've learned over the years. Feel free to PM any time with ?'s

Best of luck to you in your venture.

FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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post #8 of 8
As far as the tax man goes, always be honest, you dont want anything to bite you in the rear end down the road
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