Either way, it's clear that most small business owners do it because they love it, not because they want to get rich quickly. A complicated issue that many entrepreneurs overlook when starting their business is what their salary will be. Small business owners, like their employees, need money to take home for day-to-day living. But that doesn't mean that an entrepreneur should get into the company's money and muddy the separation between personal and business accounts; there is a right and wrong way to collect an entrepreneur's salary.
Therefore, determining your salary as an entrepreneur is an important part of running a business. But there are a variety of factors that will affect how an entrepreneur's salary is determined. One of the most predominant factors is geography. They have wide variations in living costs, tax rates and policies, economic strength and income of their residents.
All of these factors, combined with a company's financial success, impact how much entrepreneurs earn in the U. S. UU. Something as simple as where you start your business, whether it's one of the worst or best states to start a business, could make the difference between a small entrepreneur's salary and a generous one.
Read on to find out what the average salary of entrepreneurs is in each state. It is interesting to note that four of the five major states are located in the Northeast, and New England in particular, a classic “old money” center in the U. Much of the rest of the top 10 states are those in the west, with three states, Alaska, Nevada and Washington, that do not charge state individual income taxes. This primarily affects LLC owners, as these types of businesses are classified as transfer entities by the IRS, meaning that owners report profits and losses on their personal tax returns rather than having the company pay corporate income taxes.
The 10 states where employers' salaries are lowest are mostly a mix of southern and western states. Notable exceptions to this are Vermont, in the Northeast, and Indiana, in the Midwest. While the average salary for entrepreneurs may be on the lower side in these states, don't be too discouraged by them. Some of these states are among the best states to start a business, especially Florida, which boasts strong demographic and economic growth, as well as a business-friendly fiscal climate.
Idaho has also experienced impressive growth in the working-age population and jobs created by startups. Regionally, entrepreneurs earn the most in the Northeast and West, with only one southern state, Maryland, among the top 10 states. That said, three western states are among the 10 worst states, but overall, the South leads the way among states with low salaries of entrepreneurs. Entrepreneurs in the Midwest earn revenues that are above and below the national average.
Creating your own salary may sound fantastic, but it's a little more complex than you think. When you see cash flow in your business, you can't think that you can just cut off a portion and pay yourself. It should be paid only with your profits, not with your company's income. Eliminating your salary from your earnings means you are accounting for expenses such as taxes, payroll, fixed and general costs.
One problem that can arise is that if you have just started a business, you may not see benefits for at least your first year. In this case, you need to take what you need from the company's income without causing problems to your business and personal life. However, don't just get the money you need out of your company's funds; add to your company's payroll like any other employee. Another important factor for entrepreneurs and business owners to think about is what is considered reasonable compensation.
According to the government, reasonable compensation is what they expect you to receive from your business as wages. The government evaluates this based on a variety of factors including size of your business; market sector; level of turnover; and profits. A simple way to find out how much should be paid is to talk to other entrepreneurs and founders of established companies; especially those similar to yours. They can help you get a good salary comparison to help you determine what yours should be; in addition this can function as a way to network with other business owners.
In summary; The study found that mean; median; and standard deviation of entrepreneurs' income; controlled by education; overall ability (as measured by standardized test scores); and demographics (including parental age and income); tended to be higher than those of good employees old-fashioned. Despite these risks; your purchasing power as an entrepreneur is practically unlimited; provided you have a solid business model and enough knowledge to keep your company financially healthy. All of these factors; combined with financial success of a business; impact amount entrepreneurs earn in U. To determine average salary of entrepreneurs in each state; Seek Capital analyzed SBA data through U.
These channels offer protection to original inventor and act as safeguard for successful business ventures. In closely listed companies; such as sole proprietorships and partnerships; earnings of owning entrepreneurs are equal amount remaining after subtracting expenses such as materials; employee labor; renting commercial property from company's gross profits on sale of products or services. Sure; that's possible; but only handful of entrepreneurs; of those 28 million small business owners in United States; do it. While there is variation in salary for each job; there is much larger gap in what entrepreneurs earn due to variation in company's success.
The study was conducted by business professor at University of California at Berkeley; Gustavo Manso; and is based on simple but powerful idea: value of entrepreneurship lies not only in financial success of business; but also in lessons learned from experience. While employees suffer from.