Why Creative Freelancers Should Pay Themselves as a Business

Creative freelancer

Freelancers in creative industries such as writing and graphic design often rely on freelance platforms and invoices. However, paying yourself a salary can make you feel like you’re more of a company and less like a sole proprietor. Here are some reasons why freelancers should take control of their finances as entrepreneurial business owners and pay themselves a salary.

Why Freelancers Should Pay Themselves a Salary

Many freelancers pay themselves a wage by transferring their business revenue to their debit account, but a survey of small-business owners found that 38% of them don’t even do that! Passion and commitment aren’t enough to drive you through the endless weekends of sleepless nights. You still need to give yourself a monetary incentive to keep your drive fulfilled. 

Here are some reasons why you should put money back into your personal wellbeing:

  • Safeguarding Your Future: The unfortunate reality of small businesses is that they don’t last. If you put all of your eggs in one basket, you risk losing everything. Storing up savings can protect you from financial loss or help quicken your independence.
  • Taking Care of Yourself: If you care about yourself, you’ll invest in yourself. The same rings true for your business, but you can’t put everything into your company and still expect peak performance. To lower the chance of bad health outcomes, pay yourself!
  • Showing Commitment: When you pay yourself, investors take notice. They’ll feel confident in your ability to scale. After all, you’d need to have extra income and a healthy business future to give yourself a salary. In the end, you’re showing your commitment.
  • Saving for Growth: Even if you have no plans to scale at the moment, the money you save now will benefit your business sooner than later. With your own independent money pot, you can start reducing your loans, expand your office space, and more.

Freelancers who own their own business can go that extra mile by making a paystub for themselves and “cashing it in” on their payday. This way, the payment process feels more real.

How to Determine Your Payment Amount

As a business owner, you can pay yourself as much as you want, but you won’t want to dip into your company’s profits. What’s considered a “reasonable” paycheck is different for each individual and business, but everyone needs to pay for basic needs such as:

  • Groceries
  • Business Taxes
  • Household Bills
  • Rent or Mortgage Payments
  • Loan repayments
  • Transportation
  • Life Essentials 

Once you have answers to how much each of your necessities costs, consider what’s left for your business expenses. Think about how much you need to save per year or continuous growth.

How to Determine Your Payment Frequency

There are different ways you can pay yourself depending if you’re self-employed or a business entity (LLC). If you haven’t applied for a business license, you’re likely self-employed and pay income tax directly to the government. LLCs have other stipulations for separating business income, so it’s essential that you follow the proper legal process for your state.

Limited Companies

Single-member LLCs pay themselves by making an owner’s draw. This involves writing yourself a check from your business account for the amount you’re taking out of your business. You deposit this check-in into your personal bank account. Be sure to withdraw on the books as the owner’s draw, which counts as a reduction to equity and a credit to the capital account.

Are there benefits to setting up an LLC?

LLCs blend the positive attributes of sole proprietorship and limit some of its drawbacks. When you set up an LLC, you limit your personal liability, save money on taxes, and don’t have to deal with complex self-employment paperwork. Plus, you have flexibility in sharing profits.

To become an LLC, you need to file an Articles of Organization. The process for filing an Articles of Organization varies depending on which state you live in. You can view the process here.


Self-employed freelancers can pay themselves from the money they earn using this process:

  • Invoicing the client
  • The client pays directly into your bank account
  • Calculate how much tax is due and deduct it
  • Whatever is left is for the freelancer to use

It helps to set up a business bank account, so you can keep the money you make from your company separate from your personal expenses. Since your income fluctuates, you may need to hire a professional to determine how your money needs to be distributed or taxed.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.