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How to Pay Yourself As a New Salon Owner

By March 18, 2022 No Comments
How to pay yourself

Paying yourself as a salon owner can be complicated, especially as a starter who is unsure of the revenue to expect. It can be difficult to figure out how to pay yourself and by how much. This is because you need to pay yourself enough without depleting your business funds.

Fortunately, knowing what to look at when paying yourself can help you. The annual average salary of a salon owner in the US is $47,249.1 Read on for the factors to consider before deciding on how to pay yourself.

How to Pay Yourself: Factors to Consider

In order to pay yourself deservingly, you need to consider a number of factors. These factors affect your mode of payment and how much you will earn. Let us discuss these factors.

Type of Business Entity

How you register your salon business will determine how you pay yourself. The most common registration choices for new salon owners are sole proprietorship and limited liability companies (LLC).

Registering as a sole proprietorship means you are running your business individually.  Therefore you can pay yourself by drawing the profits made after taxes to cater to personal expenses. You can draw weekly, bi-weekly or monthly.

On the other hand, registering your business as a limited company separates your personal finances from your business. In this case, you can pay yourself via dividends and a salary. Hence, you get an extra source of tax-free income.

Your Business Needs

Once you have chosen your mode of payment, you need to decide how much to pay yourself. The first thing to consider is your business needs which include expenses, reinvestments, taxes, and rainy day funds. 

You need to keep an up-to-date cash flow statement to enable you to know how much and when your expenses are due. This will help you to avoid drawing excess amounts from the business at the wrong time. Also, set aside money for taxes so they don’t get overwhelmed when they are due.

Other than the usual expenses, you need to keep aside money for emergencies like repairs. In addition, you need to keep reinvesting to grow your salon. So you need to set aside funds for reinvestments.

Personal Expenses

Your household needs will also determine how much you need to pay yourself. The amount you take for paycheck should be enough to cover your recurring personal expenses and some for emergency funds. Remember to plan for retirement and insurance as well.


The amount of profit made by your salon business will dictate how much you walk away with on payday. With your business being new, your profits may not be as high. So, consider taking a smaller paycheck. Ultimately, consulting a financial and tax advisor will help you make the best decision.2

How to Pay Yourself as a New Salon Owner

As a new salon owner, you can pay yourself via salary or draw. Regardless of the method you choose, maintain consistency. Besides, your paycheck should be comfortable and affordable for you and your business. Striking a balance between your personal and business needs is key.

Links to sources used

  1. Salon owner annual salary
  1. Paying yourself as a business owner
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