If you run your own business then it’s very likely that you’ll want to pay yourself at some point! The way that you do this depends on what type of business structure you have, for instance if you’re a sole trader, or if you operate a limited company. Our video below explains the basics of taking money from your business to pay yourself.
Paying yourself as a sole trader
As a sole trader, you’re not legally distinct from your business. These means that all of the profits you generate through your business belong to you.
How do partners in partnerships get paid by the business?
Rather like in a sole trader business, the profits that a business partnership generates belong to the partners. They profits are shared between each partner according to how much of the business they own. A partner who owns 20% of the business gets 20% of the profits.
Whilst the partnership must submit a Self Assessment tax return in its own right, each partner is responsible for paying tax on their share of profits.
How do I pay myself from my limited company
Limited companies have two methods of paying the people involved in the business; with a salary, or by making dividend payments. Salaries are an allowable expense, and can only be paid to employees or company directors. Dividends are paid from a company’s profits, and are only payable to shareholders. Most directors are also shareholders, and usually pay themselves a tax-efficient combination of director’s salary and dividends.
Our online accountants can help you run your limited company, partnership or sole trader business as efficiently as possible. Talk to one of the team on 020 3355 4047 to get started, or get an instant quote online.
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