Starting a company is an expensive venture for anyone. Between employees, resources and startup costs, most business owners need to obtain a significant amount of capital and loans to attain their dream.
Some entrepreneurs may even try to recoup their loans by cutting themselves either reducing or omitting their personal paycheck. However, it’s a dangerous mistake for multiple reasons and could affect the future of your company.
A significance of proper income
Most people are not aware of the ramifications of an inadequate paycheck on themselves and their business:
- Legal consequences – Like anyone else in a company, business owners are employees, so they deserve just compensation for the work they provide. If you significantly reduce or omit your paycheck, you are vulnerable to criminal charges due to tax implications. You need to have a certain wage to properly pay and cover your taxes.
- Decreasing the value of your services – Some entrepreneurs either provide free or significantly discounted prices for their services. When you do this, it cuts the value of your work and provides a huge loss in your profits. It’s better to be upfront with the true value of your work and products right away.
- The wrong direction for your company – Finally, a paycheck is a physical representation of the work you provide for your business. It gives you the freedom to follow your dream and possibly grow other parts of your life. You shouldn’t just reinvest funds back into the business because it holds you back from expanding in other aspects of your life.
There are also other benefits of paying yourself a proper paycheck like it looks good to investors and banks. Do not wait to pay yourself until your company breaks even. Find the right salary for your budget and current profits before you sign off your salary.