Running a business brings both freedom and responsibility, and one of the biggest questions business owners face is: How much should I pay myself?

Finding the right balance between personal income and business growth can feel daunting. In this article, we’ll walk through how to pay yourself as a business owner, using insights from Jamie Trull’s expertise and strategies.

We’ll also introduce Relay, a banking platform that streamlines the process of managing and automating your pay, with a special $50 bonus offer when you open a Relay account and deposit your first $100 with my special partner link.

Why It’s Important to Pay Yourself

Many business owners struggle with paying themselves adequately. Some worry that taking too much will hurt their business, while others are afraid that underpaying themselves will lead to burnout. Here’s the key takeaway: paying yourself isn’t just a reward—it’s a necessity to keep both your business and personal life healthy.

Jamie Trull, a CPA and profit strategist, emphasizes the importance of creating a system for compensation. Whether you run a solo business or have employees, understanding your finances allows you to decide how much money to set aside for your pay while leaving enough for growth and reinvestment.

Know Your Business Structure: Salary or Owner’s Draw?

How You Pay Yourself Depends on Your Entity Type

• S-Corp or C-Corp Owners: You must pay yourself a reasonable salary through W-2 wages, similar to an employee. Research what someone in your role would typically earn to stay compliant with IRS regulations.
• Sole Proprietors and LLC Owners: In these structures, you typically take owner’s draws instead of a salary. These draws are not taxed as payroll, but you still need to set aside money for taxes.

Regardless of structure, Trull advises that your total compensation—whether as salary, draws, or both—should reflect both business performance and personal financial needs.

Organizing Your Finances with Profit Planning

A useful method to structure your pay is through profit planning. This approach involves dividing business profits into several categories, including personal pay, taxes, and business reinvestment. Jamie Trull’s system for profit planning, aligned with the Profit First methodology, makes it easier to stay on top of these allocations.

Here’s an example of how you might organize your finances:

1. Pay Yourself First: Set aside a percentage for your personal needs (e.g., 50% of profits).
2. Rainy Day Fund: Allocate 3-5% to cover unexpected business expenses.
3. Opportunity Fund: Reserve 10% for business investments like coaching or equipment upgrades.
4. Fun Fund: Create a personal savings goal for vacations or leisure activities to avoid burnout.
5. Impact Fund: Put 1-2% toward charitable causes or community contributions.

Automate Your Financial System with Relay

To make managing your pay even easier, Relay offers a banking platform that automates these financial processes. Relay lets you open up to 20 checking accounts with unique routing numbers, allowing you to allocate funds for various business and personal purposes seamlessly.

Relay is also fully integrated with the Profit First system, which means you can automate transfers between accounts based on your profit planning strategy. For example, if you want 25% of your income automatically moved to a tax savings account, Relay can handle that with no manual effort.

Special Offer: Get $50 When You Open a Relay Account

To make things even more attractive, Relay offers a $50 bonus for new business owners who sign up using a partner link. Here’s how it works:

1. Open a Relay business checking account using the provided partner link.
2. Deposit $100 into your new account.
3. Receive a $50 bonus within 14 business days after meeting the deposit requirement.

Relay makes it simple to manage multiple financial goals while avoiding the fees that come with traditional banks. It’s especially useful for entrepreneurs and small business owners who need better control over cash flow and expenses.

Finding the Right Balance Between Business and Personal Needs

The key to sustainable success is paying yourself consistently without sacrificing business growth.

As Trull explains, business owners should prioritize their pay while keeping enough funds in the business to fuel future expansion.

Your pay strategy will change as your business evolves, and it’s essential to stay flexible.

In the early stages, you might reinvest more to scale quickly, but over time, your pay should increase to match both your needs and business growth.

Whether you’re following my PROFFIT Plan or Profit First, what matters most is creating a system that ensures your pay, savings, and taxes are handled methodically.

Conclusion: A Banking Platform That Simplifies Everything

Managing your pay and business finances doesn’t have to be overwhelming. With Relay, you can organize your money effectively, automate transfers, and focus on growing your business. Plus, the $50 bonus offer makes it an easy decision to try Relay today.

Ready to streamline your business finances? Open a Relay account using our partner link to get your $50 bonus when you deposit your first $100. Experience stress-free financial management and unlock tools that help your business thrive.By using a strategic pay system and tools like Relay, you’ll be well on your way to building a profitable business that supports your life and long-term goals.

Relay Disclaimer

**Relay is a financial technology company, not a bank. Banking services and FDIC insurance are provided through Thread Bank, Member FDIC. The Relay Visa® Debit Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa® debit cards are accepted.

This video is proudly sponsored by Relay Financial. However, all ideas and opinions expressed are entirely my own and are not influenced by any sponsorship arrangements. While Relay Financial has graciously supported this content, the views presented are genuine and independent. Out of respect for our viewers, we only collaborate with companies that we truly believe in. Thank you for watching and supporting the sponsors who make these videos possible.

Video Transcript: 

This is an unedited video transcript. Please excuse any grammatical errors or conversational quirks.

How to Pay Yourself as a Business Owner

Are you a business owner grappling with the question: “How much should I pay myself?” It’s a common dilemma, but fear not—we’re going to explore the art and science of determining your salary. Whether you’re a solopreneur or leading a team, this video will help you find the right balance between financial stability and business growth.

Why You Need to Understand Your Finances

Hi, I’m Jamie Trull, CPA and profit strategist. On this channel, I provide tools, resources, and recommendations to help you manage your business finances and become more profitable. Stick around until the end of the video for my biggest tip on how to run a profitable business that supports you and your lifestyle.

When it comes to paying yourself, the first step isn’t just to pick a random number—you need to understand your finances. You need to track revenue coming in, expenses going out, and the timing of cash flows. If your finances are disorganized, it’s hard to know how much you can afford to pay yourself.

Entity Type Matters For Small Business Owners

One key nuance to determining your salary is your business entity type. If you’re taxed as a C corporation or an S corporation, you’re required to pay yourself a reasonable salary in the form of W-2 wages. Essentially, you’re paying yourself as you would any employee.

You’ll need to do some research or look at market studies to determine what a reasonable salary is for the roles you perform within your business.

• Pro Tip: Since business owners wear many hats, the salary you set needs to be defensible if ever questioned by the IRS.

Beyond W-2 wages, S corps and C corps can distribute additional profits as owner’s draws—essentially taking home extra earnings beyond your regular salary.

Paying Yourself if You’re a Sole Proprietor or Single-Member LLC

If you’re not taxed as a corporation, you’ll primarily pay yourself through owner’s draws. Whether you’re a sole proprietor or single-member LLC, you won’t receive a salary but instead draw from the business profits.

When I refer to what you pay yourself, I mean the total compensation you take from your business—whether in the form of W-2 wages or owner’s draws. The goal is to balance what your business can afford with what you need to support your personal life.

Striking the Right Balance: A Challenge For Many Business Owners

Paying yourself is a balancing act. Take out too much, and your business may lack the fuel it needs to grow. Take too little, and you risk burnout—feeling like your business is taking advantage of you.

Remember: You didn’t start your business to work for free. Your business should support your life, not the other way around.

Should You Pay Yourself a Set Percentage?

You might be wondering if there’s a specific percentage of revenue or profits you should use to determine how much to pay yourself. Unfortunately, there’s no universal rule for everyone. Your pay will likely change over time as your business evolves and your personal goals shift.

The most important thing is to ensure you pay yourself something—even if it’s a small amount.

Profitability is Key

The more profitable your business becomes, the more you can pay yourself. I’m a huge proponent of running profitable businesses because profitability not only allows you to pay yourself more but also gives you the ability to reinvest in your business.

With greater profits, you can grow your business and increase your income over time. The goal is to create a sustainable system where both you and your business thrive.

How to Create a Custom Profit Plan

So, how do you determine the right amount to pay yourself? You need to develop a custom profit plan that aligns with your personal and financial goals.

I’ve created a system called Profit Planning—that’s profit with two F’s. It’s designed to help you develop a personalized plan for how much to pay yourself and how to allocate your business profits strategically.

Walk Through the Profit Planning Worksheet

If you want to follow along with me, I’ve created a free Profit Planning Worksheet. You can customize it with your own numbers and percentages.

Download it here: jamietrull.com/profit

Example: Profit Planning in Action

Let’s say you run a business that generates $15,000 in profit per month. How much should you pay yourself?

1. First, estimate your monthly personal expenses—what you need to cover your bills and live comfortably. Let’s say that’s 50% of your profit, or $7,500 after taxes.
2. Next, allocate for taxes. I typically recommend setting aside 25-35% for taxes, depending on your tax situation.

You’ll also need to create separate funds for things like rainy day savings, opportunities, or future growth investments.

Automate Your Profit Plan with Relay

If managing multiple accounts sounds overwhelming, don’t worry. Relay Financial makes it easy to set up multiple bank accounts—and automate transfers between them.

With Relay, you can assign a specific percentage of each deposit to your pay yourself fund, tax savings, or growth fund. Relay even lets you automate these transfers so you can stick to your plan without thinking about it.

Conclusion

Systematizing how you pay yourself, save for taxes, and reinvest in your business will transform how you manage your finances. Tools like Relay make it easy to implement these strategies seamlessly.

To make the most of your business income, download my Profit Planning Worksheet and open a Relay account through jamietrull.com/relay. Deposit your first $100 and get $50 free—a little bonus to kickstart your financial success!Thank you for watching! Be sure to like, subscribe, and share, and I’ll see you in the next video.