How to correctly pay yourself from your private practice

Subject: How to correctly pay yourself from your private practice

When you own a private practice, figuring out the best way to pay yourself can be a bit tricky, and it really depends on how your business is set up. Here’s a simple breakdown to guide you through this:

If you are a Sole Proprietor or have a Single-Member LLC:

• You can't be added to the payroll.

• Instead, you take money out of the business as needed; these are called owner’s draws.

• You report your private practice profits on the personal tax return (Schedule C).

• You’ll pay self-employment taxes, which are currently 15.3% of your net income.

If your business is an S Corporation:

• You need to pay yourself a reasonable salary with a W-2, which comes with standard payroll taxes (FICA), shared between you and the corporation.

• Any money you pay yourself beyond your salary won’t be taxed payroll taxes.

I hope this clears things up! Take the route that fits your business model and always consult with a tax professional to make sure you’re on the right track.

Schedule a free 15-minute strategy session to learn how I can help you.

Best wishes,

Jeanette Andrada, MBA, EA

Private Practice Tax Strategist

IRS Enrolled Agent