No, really — it does.
I ask each client a handful of questions when trying to determine how much they should compensate themselves:
- What industry are you in?
- How much work do you do?
- Do you have any employees?
- How much money are you currently making?
- Are you a PLLC or LLC?
- Are you an S-Corp? (The below information does not apply to S-Corps because S-Corps require a reasonable compensation.)
Generally, I’ll look into your records and cash flow to help determine your salary. However, the following chart works well as a general outline to determine your compensation, especially for service-based businesses like a Therapy Practice, Massage Therapist, or Chiropractor.
|Income Between||Recommended Compensation|
|$0 to > $250,000||50%|
|$250,000 to $500,000||35%|
|$500,000 & Up||We should talk|
What if I can’t afford to pay myself in those ranges?
It might be time to dig into your expenses and see what you are spending money on. When looking at your expenses, ask yourself: is this required or does this bring in clients?
If the answer is no, should you really be spending money on it?
TL;DR: Figuring out what you should pay yourself is difficult. To determine your salary and compensation, speak with a professional for advice.