Women in Business Tip: How Much Should You Pay Yourself?

May 14, 2014 Rieva Lesonsky

how much should you pay yourself

President Obama recently refueled the gender pay gap issue by signing an executive order for transparency. At the same time, some politicians claim the pay gap exists because of job differences, not gender differences (data disputes this claim). The truth is the gender pay gap exists even when it comes to women business owners paying themselves. Is this because women entrepreneurs are benchmarking their pay against salaried women, because they are more risk averse or because they lack confidence to pay themselves appropriately?

Whatever the case, how you determine salary is genderless and simply a numbers game. Depending on what stage you are in your business, small business owners usually can determine salary based on a percentage of profits. If you’re just starting out, it may be determined based on personal costs and how much you need to live. Your accountant is the best person to give you advice when it comes to paying yourself, since there are so many factors to consider, including taxes. Remember, paying yourself too much will send up red flags at the IRS—but so will paying yourself too little.

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Author information

Rieva Lesonsky

Rieva Lesonsky

Rieva Lesonsky is CEO of GrowBiz Media, a media and custom content company focusing on small business and entrepreneurship. Email Rieva at rieva@smallbizdaily.com, follow her on Google+ and Twitter.com/Rieva, and visit her website, SmallBizDaily.com, to get the scoop on business trends and sign up for Rieva’s free TrendCast reports.

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