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Determining how to pull money from your business is a critical step in small business ownership. Whether you take a draw or a salary, makes little difference if you are a sole proprietor. A combination of salary and draw is typically how most small businesses start. When the business is doing well, the draw can be easy to utilize, but remember that the business will need cash flow when times are leaner, so overdrawing on the business can cause issues down the road. That’s where a controlled salary can help keep cash in the business and make it less tempting to take more cash out of the business than you really need. The owner’s draw is also taxable on the owner’s personal tax return and owners must make estimated tax payments and self-employment taxes on any draws.
Steven A Feinberg Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
See all blogsIf you own a small business, you’ve no doubt seen those ads promising quick and easy small business loans, usually for large dollar amounts. Should you really take out such a loan? Before you sign the loan agreement, there are… Read More...
For the first time since 1986, the U.S. Congress passed major tax changes affecting both individuals and businesses across the country. The Tax Cuts and Job Act of 2017 (TCJA) has far-reaching impact for many business types and individuals. The… Read More...
November 15th, 2021