Indies Don't Receive Salary or Wages or Dividends

June --

I Have been a self-employed audiologist for 3 months. Where can I find current info about paying my self-employed self a salary vs salary+dividends and the tax implications for each option?

Specifically, how do I set that up now as I begin the business?

Thanks,
Brandi
South Lebanon, OH


Hello Brandi,

Your question shows that you are new to self-employment and that you need a lot of information.

Indies do not receive salary. They receive gross income from clients, subtract expenses and are left with a net profit. I suggest you read some of these posts on being self-employed .

This, directly from my book, Self-employed Tax Solutions, explains a bit more:

YOU'RE THE BOSS. PAY YOURSELF WHATEVER YOU WANT.
Many self-employed people have a fuzzy idea about their own business profits. They think that the weekly, monthly, or occasional checks they write to themselves -- called draw in the corporate world - is their income or their salary or their profit. They are wrong.

The checks a self-employed makes out to himself have no bearing whatsoever on his income, expenses, profit, or taxes. Whether you write yourself a $100 or $1,000 check every week you are doing nothing other than altering cash flow by moving money from one place to another. It's called draw because you are drawing money away from someplace.

I wish you success,
June