Paying yourself in a partnership

[Isabel.Blake]

Hi all

Was just after some help and advice. I’ve just started my own nail bar with a friend and we have registered as a partnership.

We’re coming to the end of our first month and I want to know how we go about paying ourselves. I understand we have to invoice ourselves (I think?!) but does anyone have any *simple* advice on how we do it what we need to include etc !

Also not for this month but for future months she’ll be doing 3 days and I’m doing 5 so we’ll both give ourselves a daily rate then profit left after that we will divide so does this need to be dealt differently ?

Will be so appreciative of anyone that can help!!

Thanks so much in advance !
X

 

[daydreams01]

First of all congratulations and an even bigger well done if you are able to pay yourselves a wage so soon, it took me a lot longer!
I would set up a business account and get all your rent and utilities, business rates etc on a direct debit to go out on a set day each month, then what’s left is for stock and wages and other bills.
I pay myself a monthly amount which is just below tax threshold and I can also get a tax free dividends allowance per year which I have divided up into equal monthly payments. Resist the urge to pay yourself too much too soon and maybe just figure out an amount you know you can live off for the time being.
Because I invested a lot into the business, I also take a lump sum every now and then to pay myself back. I then let the rest stay in the business account which can pay for training courses or anything else business related as and when I need it. There is always something needing paying!

If it’s been a good month and the account is looking healthy I can withdraw an extra amount but I would advise not spending all your profit straight away and to prepare for any quiet times you may encounter even though it’s tempting!

If it’s all done through your bank, it will make it easier to do your accounts at the end of the year as it will all be listed on your statements.
It’s tricky coz you are in a partnership and working different hours so maybe work out an hourly rate you are both happy with and then from there work out a monthly wage you both feel is fair even if it means you both get a different amount each month.

 

[Isabel.Blake]

First of all congratulations and an even bigger well done if you are able to pay yourselves a wage so soon, it took me a lot longer!
I would set up a business account and get all your rent and utilities, business rates etc on a direct debit to go out on a set day each month, then what’s left is for stock and wages and other bills.
I pay myself a monthly amount which is just below tax threshold and I can also get a tax free dividends allowance per year which I have divided up into equal monthly payments. Resist the urge to pay yourself too much too soon and maybe just figure out an amount you know you can live off for the time being.
Because I invested a lot into the business, I also take a lump sum every now and then to pay myself back. I then let the rest stay in the business account which can pay for training courses or anything else business related as and when I need it. There is always something needing paying!

If it’s been a good month and the account is looking healthy I can withdraw an extra amount but I would advise not spending all your profit straight away and to prepare for any quiet times you may encounter even though it’s tempting!

If it’s all done through your bank, it will make it easier to do your accounts at the end of the year as it will all be listed on your statements.
It’s tricky coz you are in a partnership and working different hours so maybe work out an hourly rate you are both happy with and then from there work out a monthly wage you both feel is fair even if it means you both get a different amount each month.

Ah thank you so much for writing such a detailed reply!!! And thank you for your congratulations! So far it’s going well but let’s see how long it lasts !

All that info is great need to have a sit down and properly think it out. I defiantly think we’re going to set ourselves a rate each and pay ourselves that then any profit we split as we’ve both put the same amount into the business !

Luckily my sister is an accountant so thank god she’s doing a lot for me ! But this has helped so much clear my head a bit. Thanks again!

 

[Isabel.Blake]

First of all congratulations and an even bigger well done if you are able to pay yourselves a wage so soon, it took me a lot longer!
I would set up a business account and get all your rent and utilities, business rates etc on a direct debit to go out on a set day each month, then what’s left is for stock and wages and other bills.
I pay myself a monthly amount which is just below tax threshold and I can also get a tax free dividends allowance per year which I have divided up into equal monthly payments. Resist the urge to pay yourself too much too soon and maybe just figure out an amount you know you can live off for the time being.
Because I invested a lot into the business, I also take a lump sum every now and then to pay myself back. I then let the rest stay in the business account which can pay for training courses or anything else business related as and when I need it. There is always something needing paying!

If it’s been a good month and the account is looking healthy I can withdraw an extra amount but I would advise not spending all your profit straight away and to prepare for any quiet times you may encounter even though it’s tempting!

If it’s all done through your bank, it will make it easier to do your accounts at the end of the year as it will all be listed on your statements.
It’s tricky coz you are in a partnership and working different hours so maybe work out an hourly rate you are both happy with and then from there work out a monthly wage you both feel is fair even if it means you both get a different amount each month.

Sorry one more thing. When you pay yourself do you literally just withdraw the money or do you make up N invoice for yourself ? If so what do you include on the invoice ?

 

[daydreams01]

I just do a bank transfer naming it wages. I have an accountant that does all my payroll and tax, I just send him my bank statements and monthly salon totals reports and he sorts everything out and tells me if I have a tax bill to pay etc.

 

[BannerPenguin]

You need to make sure you sort out wage slips and sort out PAYE, tax, NI etc. I know you mentioned your sister is an accountant so I'd probably get her formally to deal with everything or hire an accountant as it can get very tricky. Any profit realistically should be left in the business and only do dividends either quarterly/6 monthly/annually as you'll have unexpected expenses at times plus your marketing budget etc. and it's best to come out of the business account. You should just have your salary for now in my opinion. Remember you still allow about 20% corporation tax on profits so put this to one side plus that's still applicable to dividends.