What is an optimal percentage of salary to say net profit they should typical pay yourself?

There are all of these variables that go into what a reasonable salary is, though the general rule of thumb in no less than 30%. I have clients that make a lot of money and their salary comes out to be less than 10%. One of my clients is a doctor that makes $5 million a year, and his salary is $500,000 which is only 10% of the profit, but for his business that works.

This is something that we encourage everyone to work with their CPA on.

Sometimes you’ll want to take a bigger salary. For example, if you’re trying to qualify for certain personal mortgages, if you’re buying some rental properties, and the bank needs to see that you had $80,000 of salary to make that loan go through. It is what it is. You’re going to have to pay the $80,000 salary so that you can meet the requirements the bank needs for some personal loans you might be doing. Or, you might have some retirement goals where you’re looking to put some money into your Solo 401k or retirement plan and it’s based on the amount of salary that you pay yourself. So there are many variables in determining what your salary should be other than just based on the net profit of the business. You’re really going to want to consider what you are trying to accomplish when you’re coming up with what that reasonable salary is.

I always tell people, if you’re going to go less than 30% of net profit, be sure that you’re talking to and getting advice from your CPA.

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