Why does owner compensation matter?

Owner compensation matters because it provides the motivation to continue running your business. As a business owner, taking a salary allows you to invest in yourself and your organization. Plus, paying yourself is necessary, just as it would be with any type of job, so you can meet your personal financial obligations. 

What’s the average business owner salary/pay?

The average business owner's salary varies greatly depending on the size of the business, the industry, and the business owner’s experience. For example, a small business that is just starting out will likely pay its owner a much lower salary than a larger, more established business with more revenue. The median income of the self-employed is just over $84,000 per year. 

What’s the most tax-efficient way to pay yourself?

The most tax-efficient way to pay yourself as a business owner is to pay yourself a salary. You can often use a combination of salary and other forms of compensation such as dividends, bonuses, or distributions of profits in order to maximize your tax efficiency. Depending on your business structure, you may also be able to take advantage of tax deductions for employee benefits such as health insurance or retirement savings. Be sure to consult a tax advisor to understand the best strategy for paying yourself as a business owner.

About the Author

Christopher Murray

Christopher Murray

Personal Finance Expert

Christopher Murray is a professional personal finance and sustainability writer and editor who enjoys writing about everything from budgeting and saving to unique investing options like SRI and cryptocurrency.

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