AboutDavid E. Coffman CPA/ABV, CVA Expertise General questions about small business management, planning, and measuring and improving business performance. Specific questions about what a business is worth.
Experience Certified Public Accountant, Accredited in Business Valuation (ABV) and Certified Valuation Analyst (CVA). Over 30 years experience advising, owning and operating small businesses. Specializing in business valuation and innovative consulting services for small businesses since 1997.
Question I am starting my own painting business I have been told that it is best to be an employee of your own business actually cut yourself a pay check and take taxes out do you agree we this and if so is there any software to help me with this or is it best to go through an accountant
Answer What you are really asking is how to structure your business - as a sole proprietorship or a corporation. A sole proprietor is self-employed and not considered an employee of the business so there are no paychecks. The profits of the business are your taxable earnings. You take the profits out of the business as withdrawals of capital not as wages. You pay your taxes by making quarterly estimated payments.
A corporation is a separate legal entity so you would be an employee of it and pay yourself wages. Payroll taxes would be withheld from your wages and paid by the corporation. Forming a corporation requires filing various documents and registering as an employer to withhold and pay payroll taxes. This option is more complicated and expensive.
I suggest operating as a sole proprietor. It is simpler and cheaper. If the business is successful and grows, you can consider incorporating at a later date. QuickBooks is the most popular business accounting program and it is easy to use, but you should still see a CPA to help you get set up properly.
