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In a self employment business, is it more beneficial to set up dividends or owners withdrawals and how do we report these.
Monday, March 29, 2010
In a self employment business, is it more beneficial to set up dividends or owners withdrawals
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3 comments:
Dear AJ, thanks for submitting your question on our blog.
Dividends are issued when the business structure is set up as a corporation. A Sole Proprietorship and a Partnership is classified as self employed business. A Draw reduces owners equity in the business, and it is not an expense. Regardless of your business structure, assuming that you are a small business owner, your tax will be calculated based on your business earnings and not the distributions or draws. You don't report draws when you are a sole proprietor because you report your business income and expenses on schedule c, where as a partnership will disclose the draws on Page 5 of Form 1065, which is the partnership's balance sheet.
We hope this satisfies your questions.
Good luck,
Web Tax Office Team
Similar question. I have selected taxation as an S-Corp. I have paper loss but real profit. How do I distribute this profit to the shareholder?
Hi Osa, thanks for submitting your question to us. We apologize it took little longer for us to respond.
If you have already figures out the distributions then thats great if not then distibute according to the agreed percentage.
Good luck,
Web Tax Office Team
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