YOU ASKED: What is the best way to pay myself?
WE ANSWER: If you own your practice, figuring out how to pay yourself isn’t always as simple as cutting a paycheck. Your compensation should be strategic, sustainable, and aligned with your goals.
1. Understand Your Business Structure
- Sole Proprietor or Single-Member LLC. You’ll typically transfer funds from your business to your personal account. This isn’t taxed at the time of withdrawal but is reported as personal income on your taxes.
- S-Corporation or Partnership. Here you are required to pay yourself a reasonable salary via payroll if you work in the business. This is subject to payroll taxes. You can also take owner distributions, which are taxed differently and can be more tax-efficient when handled correctly.
2. Determine the Right Amount
Look at your cash flow and net profit. Your compensation shouldn’t put your business at risk. A good baseline is to pay yourself what you’d reasonably pay someone else doing your job — whether that’s clinical care, business management, or both. You can adjust over time but avoid overpaying yourself too early or underpaying to the point of personal financial stress.
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3. Be Strategic
- Separate business and personal finances. This protects you in an audit.
- Set aside taxes proactively. Draws and distributions are part of your net income and aren’t taxed when you take them — but are when you file. Build a monthly savings habit.
- Think long-term. Paying yourself a consistent salary helps with mortgage applications, retirement planning, practice valuation.
4. Get Expert Help
The rules around compensation are complex. Work with an accounting or tax professional who specializes in the industry to create a strategy that’s compliant and smart.
