Should you be on Payroll?

November 8, 2023

Video Transcription

Hi, I’m Donna Bordeaux with . I get a lot of questions, especially with the PPP loan issues, going around about putting yourself on payroll, or putting the owners of the business on payroll. And there were a lot of different opinions when you start to look around as to yes or no, should I be on payroll, but this is a really critical decision and it really depends on how your entity is taxed to determine the proper answer for you. So I’m going to give you some clues as to how to look, to determine how you should be paid as an owner of your studio. First off, if you file a separate tax return for your business altogether, that would be an S Corp and form 1120s a partnership form 1065 or a corporate return form 1120. Those are all separate entities and you will have one set of rules.

Many of you may be sole proprietors, which means that you file a schedule C and it is included in your standard 1040 in your personal return. It does not have a separate return. So those are the choices for tax returns. Now you may be an LLC that is a legal entity, not a tax entity. So you’ll need to refer back to how you file and pay taxes. If you are a schedule C sole proprietor or a partnership filing form 1065, that means you have more than one owner of the business. You should not receive a paycheck. You will not receive a W2. So you may not be on payroll. You will have a whole separate set of rules. If you are filing as a corporation or an S Corp, you will be on the payroll. Now as an S Corp, you must be on the payroll.

If you’re profitable, there are requirements for having reasonable compensation as an S Corp owner. So I hope that clarifies for you as to whether or not you should be on the payroll. If you have questions about this, feel free to comment below, watch for those comments and help you get through this process. Thank you very much. I’m Donna Bordeaux with . Please remember to subscribe to our YouTube channel and follow us on Facebook. Check out our website as well. We’ve got a blog with a lot of content specifically for studio owners. Thank you very much. You have a great day.

Donna Bordeaux, CPA with

Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna Bordeaux and PYOP Donna and her husband, Chad, who is also a CPA, have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help PYOP studios earn 4 times more profit than the average PYOP and are passionate about helping industries that help families build great memories.