Receiving a regularly scheduled payment provides a clearer picture of the health of your company. If you don’t allocate funds to your salary, it can be hard to tell when you should raise prices, ramp up marketing efforts, or cut costs. While it may be difficult to initially factor in a salary, once you have sustained revenue, steady projected revenue, and you’re operating in the black, you should be able to pay yourself.
The IRS says business owners should pay themselves reasonable compensation, but there’s not a definitive answer as to what this is. To some extent, pay will be determined by how your company is structured—if you’re a sole proprietor, compensation can come in the form of a draw or distribution, or if your business is a corporation, you can opt for a salary plus a draw, dividend, or distribution. If you’re unsure what you should be paying yourself, consult with an accountant for advice, or check out the U.S. Small Business Administration’s database of income statistics.