How Do I Pay Myself?
This is one of the most frequently asked questions we get as bookkeeping and tax professionals. The answer is "It Depends". There are many items we need take into consideration when answering this question, but the first is how is your business structured?
Payment Types by Structure
[Table content - see full article for details]
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Sole-Proprietorship
As the simplest business structure, Sole Proprietors have the simplest way of paying themselves. A business owner would write themselves a check or transfer money from their business account to personal account. This is called taking an owner's draw.
S-Corporation
An S-Corporation owner can receive compensation as Reasonable Salary or Distribution. Owners are required to take a reasonable salary and cannot simply take distributions.
C-Corporation
The main way a C-corporation owner is paid is when dividends are declared by the Board. A dividend is where profits are paid out after taxes.
You should consult your tax professional as well as your legal counsel for your particular situation.
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