Just started an LLC and am trying to get all my ducks in row for an upcoming contract assignment.
Correct me if I'm wrong but I'm thinking even though I own and run the business, I am also an employee and thus I need to create a payroll in order to pay myself a salary out of the income from the business, correct?
Basically let's say the contract is for $100,000 a year, I want to pay myself a salary of say $50,000 a year, the other $50k stays in the business account to cover expenses, etc. while I pay myself my salary, I also deduct all required taxes, etc. just as my employer would.....am I correct in this thinking?
Any suggestions on software to do all this, something along the lines of Quickbooks, but cheaper or at least less restrictive as they've become heavy on fees for basically any service you use now.
Answers & Comments
Verified answer
There are several things you need to know. First off, I would be happy to show you how to figure your payroll taxes. Yes you have to pay them if you pay yourself from the company. Second, and most important, you need to understand that any money left over in the business (profit) will be taxed as a corporation. So it is a good idea to pay yourself most of the money in the corporation, unless you are reinvesting the money into the business.
PS.....don't pay a CPA and Lawyer for anything, unless you desperately need their help. Payroll taxes are very easy and if you make a mistake in your calculations, you will receive a letter from the IRS telling you what you owe. There is seldom any need to pay a CPA for this service, if you just learn how to do the taxes yourself.
yes, you are correct.
And quickbooks IS the cheap option.
If you are going to run a business and won't pay the minimum to keep your books in order, you are going to be in a world of hurt.
$100,000 is near the line where it always makes sense to hire a CPA and a lawyer on a consulting basis to make sure all your t's are crossed and i's dotted. I would say it always makes sense, unqualified...but on websites like this one many people aim low and fly lower. My (consulting) business started some years ago in the $100,000 range and I used Quickbooks, a lawyer and a CPA.
I'm sure you've heard it said that huge numbers of new businesses fail within the first 5 years. I think it would be more accurate to say that the businesses that fail probably all failed within the first 5 days...it just takes several years to run out of money.
It has been my general observation that anything worth doing is worth doing right. Doing it right means organization and consulting experts in areas that are not your strong suit.