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At what point can I start taking profit from my startup?
I invested heavily into my startup company and now that we are making a profit. I need some advice on how to start paying myself.
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2 Answers
Have you been paying yourself since the inception of the company?
Are there employees?
Are they being paid?
Is there any debt being carried from the business (personal, mortgage, credit cards etc)?
Is it a LLC?
Is it a C Corp?
Is it a S Corp?
Is it a Sole Proprietor?
Do you have shareholders?
Are dividends being paid?
Sorry for more questions, just want to make sure I understand your question fully.
In addition to the questions posed by the other individual, consider this...
1) Most business fail due to liquidity issues within the first five years of inception
2) Given the above, it is better to maintain more cash in the beginning.
3) Given this is a startup, I would suggest only take out as much cash as you really need - of course you need to survive, so you need to consider that also.
4) Given our current economic environment, I would suggest an additional cash safety buffer for the business, so taking out less as opposed to more is probably in the business' self interest.
5) As with any new business, as you start to take cash out, it should be done gradually and incrementaly - in a common sense fashion. If there are large surpluses, then a small amount for personal use is appropriate. As your business grows, you'll understand the cash flow dynamics of the operation, and how much you can safely pull out without running into trouble. I would suggest NOW is not a very good time to feel comfortable thinking one understands the dynamics of a new business.
You may email me if you have any questions.
Robert
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