How To Pay Yourself When Self-Employed
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When you’re self-employed you probably want to get paid.
So you think you should pay yourself.
At least a little somethin’, amirite?
You are the business owner after all!
I mean, you do have bills to pay.
Unless you live with family or are taken care of I guess!
But let’s stay on point here lol.
How do most people take money out of their business for personal expenses?
By writing a check and taking it to your financial institution to deposit.
Or doing a mobile deposit.
Or simply transferring money whenever they need it.
Some people I have worked with have made transfers as many as 3-4 times a week.
That is a horrible way to pay yourself no matter how you look at it, but not uncommon.
Why?
Because, just like anything else, there is a right way and a wrong way to get money out of the business to take care of personal expenses.
And just to be clear, when I say “pay yourself” I’m using that to describe the act of taking money out of your business to use for personal purposes.
The Problem With Taking Money From A Business
The money that comes into a business is meant to be used strictly for business purposes.
That means it can only be used for paying for:
- supplies
- business rent
- running payroll
- marketing costs
- your business website & all its related costs
- and anything directly related to the operation of the business.
That money is not to be used to pay for your:
- mortgage payment
- grocery delivery services
- utility bills
- car insurance premiums
- anything for your kids
- personal vacations
- or anything else that has nothing to do with the business.
If you work from home, you can take a reasonable portion of certain household expenses such as phone, power, cable television & internet, or auto-related outlays.
Sometimes, however, it is necessary to take money out of the business in order to cover some personal expenses…
The Wrong Way To Pay Yourself
Lots of people who own small businesses don’t know how to properly handle the task of taking money out of the business.
Unfortunately, many also don’t feel like they need to work with a tax accountant because they can “Google what they need to know”.
They simply make payments for their personal expenses out of the business bank account or use the business credit card for those personal expenses.
Some even head over to the ATM machine and take cash out of the business for no other reason than to have some pocket cash.
None of those methods are even close to proper.
Another thing I’ve been hearing as of late is incorrect advice for sole proprietors and single-member limited liability company (SMLLC) members, or the partnership partners to sign up with a payroll service and take a salary.
While in theory that’s a sensible option and helps to alleviate the headaches of paying self-employment tax each quarter, it’s not permitted.
A sole proprietor can have employees but they cannot be employees.
If anyone recommends that you pay yourself by putting yourself on salary as either a partner (of a traditional partnership without S Corporation status) or a sole proprietor you should ignore them and seek advice elsewhere!
The Correct Way(s) To Pay Yourself
Let’s face it, starting a business wasn’t done just to put in work and get no reward.
You want to get paid for your time and effort.
If you need to access money for personal reasons, there are three acceptable methods for doing so:
- Putting yourself on salary and taking payroll checks (if an S-Corp)
- Writing a check to yourself in the form of a distribution (again, if an S-Corp)
- Schedule regular draws (if you’re a sole prop or Single-Member LLC) instead of random withdrawals
You should always create some sort of separation between business and personal expenses, and taking either of these steps does so without drawing any unnecessary attention to the transactions.
Setting yourself up with regular payments, even if they aren’t actual “salary” checks helps not only keep the business looking legit, but it also helps people budget better because it simulates a regular salary like before they took on the entrepreneurial venture.
It also creates a paper trail, which keeps you in a good position if/when it comes to…
Getting In Trouble By Not Paying Yourself Properly
So what’s the worst thing that can happen if you don’t keep your business and personal money and expenses separate?
If you continue to treat your business as your personal piggy bank?
Bottom line is that if you are ever looked at for any reason by the IRS, a whole lot actually.
The first that that would happen is that you would have to undergo an audit, during which the burden would lie on your shoulders to prove that the expenses in question are valid business expenses.
It is your responsibility to show proof in the form of receipts or invoices that can support your claims.
If you cannot, then the fun really begins.
If you happen to be a C-Corporation, then the tax return would be recalculated with all of the expenses added back.
What makes this particularly troublesome is that C-Corps can be taxed at higher rates than individuals.
Not only that but you will be assessed interest and penalties on the unpaid portion of the newly calculated tax liability.
If the business is a partnership or an S-Corporation, the expenses will still be added back to the tax return, but it gets a little dicier from there.
Since those business formats flow through to the personal income tax return, you not only have to have your individual return recalculated but the additional income may in fact cause you to be phased out from deductions and/or credits that were originally claimed.
Let’s also keep in mind that if you have a state income tax, your state return will be affected too.
From there, your new income tax liability will be computed and you will again be charged penalties and interest on the unpaid portion of this new figure.
Additionally, you will now be on the IRS’s radar and the chance for future reviews and audits will increase.
On top of that, if you needed to raid the business accounts to support your personal lifestyle, then you will be in even greater trouble once the interest and penalties start piling on.
“How Much Should I Pay Myself?”
This is something I get asked regularly:
Hey Eric, I’m newly self-employed, can you tell me or help me to figure out how much I should pay myself?
Dozens of entrepreneurs
It’s not a bad question.
In fact, it’s a sign that they are thinking about things in the right way.
The answer, however, is difficult to come by.
It’s like most things in life, the answer is: it depends.
Everyone has a different circumstance and family situation to consider when coming up with a figure to pay yourself.
Another thing that factors into the equation is whether the business is profitable or not.
Obviously, if your business is losing money, you can’t pay yourself.
The best way I have found to answer the question of “how much should I pay myself” is to do this:
- Make a budget for your personal needs
- Figure out how much in total you will need to pay yourself in order to meet the budget
- Divide that number in half
- Pay yourself one half on the 15th of the month
- Pay yourself the 2nd half on the last day of the month
This essentially acts like a regular paycheck which makes it easier to maintain a budget.
If, however, you can’t pay yourself that amount in full, then simply pay what you can.
The point of this exercise is to make it so that you aren’t constantly dipping into your business money to pay for your personal expenses.
So now you know the answer to the question “How much should I pay myself?” should you be wondering?
Wrapping Up
Well, that’s the basics on how to pay yourself as a self-employed “boss”.
Granted, no one article can ever address everyone but this should help the majority of you.
Keep in mind 2 things:
- Nothing is written in stone–you can schedule it however and use any dollar figure you wish.
- These aren’t “rules” or “laws” just guides to help keep you out of potential trouble and make it easier to manage your business plus your money.
I urge you to adjust these guides to suit your own individual situation.
And one last thing:
A BUSINESS IS NOT YOUR PERSONAL PIGGY BANK!
Your Turn
How do you pay yourself as a self-employed person? Do you just take money out of the business account whenever you feel like it? Do you have a schedule? Do you leave the money in the business account and simply pay yourself whenever you want to bring that balance down?
Hello Eric,
I am the owner of a custom cabinet and general remodeling S Corp. 4 employees.
Can I personally contract my own business to renovate an old farmhouse I purchased personally? Pay the S Corp a fair and profitable price from my personal funds?
Company would write off payroll and materials but take in payments to show a real and reasonable profit in line with what the company sees in its other contracts.
Hey Ray!
I have seen people do that exact thing, and as long as it’s on par with your normal rates then there shouldn’t be a problem as long as you treat it like any other job with estimates, invoices, deposits, etc.
I have a sole proprietorship business and I want to take a draw to pay for an e gift card for my spouse. Would it be okay to transfer the amount to PayPal to pay for the card and make a note on the transfer from my business to PayPal, “ owner draw” .
Sue
Loved this article! Very informative and a lot of things that my coworkers and I have been noticing – a lot of spending on company card for vacations, nights out and personal expenses – took himself off payroll so he could actually just spend what he wants, now the best part – we are off the books and cannot pay taxes because he cannot “afford it” so he’s been just paying us under the table. Very frustrating 🙁
I know a CEO in a nonprofit company that pay his wife repair computer with the nonprofit company money, also his water bills, hotel is ok company pay because the seminaries, but his drinks and take his entire family, I don’t think so the nonprofit company should be pay for that, he hired a new COF, he does anything what CEO tell him to do, they don’t want nobody else do payables, and now I know why, is any places or organization we can let them know what is going on without me getting involve, I just don’t want have problems in the future when looking for a job.
Hi,
Thanks for this article. I have a couple of questions – I’m a new LLC and S Corp (once the government reopens). I am the only member. I want to set up an account to put some percentage of the money coming in aside for taxes. Can this be a personal account or should it be a second business account?
Secondly, I want to use a credit card that is not labeled “business credit card” but it would solely be used for business expenses. How do I pay this? Would I expense the credit card bill, write a check to myself, and then pay the bill out of my personal account?
The previous owners (also my parents) were sole proprietors so a lot of the things they did I’m finding I cannot do as easily.
Thanks!
Well, the first thing is as an S-Corp you should be on a regular payroll–not just taking money out, but rather the actual thing with impounded taxes and paystubs, W-2, etc. If you aren’t then you should get started immediately since that is a requirement of running an S-Corp. I suggest using Gusto and ALL my clients love it…I even use it for my own payroll.
If you want to hold back extra money in saving specifically for the pass-through income, then you can absolutely use a personal account for that. Since you pay those taxes on your personal return, it’s the perfect way to save if you use a personal, high-yield account.
Regarding the credit card, there is a reason they have “business” cards: you need to have the card registered to the business. By using a “personal” credit card, it’s in your name and theoretically you could be viewed as commingling personal and business funds which isn’t a good thing…better to just keep business stuff in the business name/EIN and your personal stuff in your name/SSN.
Thanks for the quick response. Yes, I am taking a paycheck so that is good! It sounds like the main point for sure is business is business and it isn’t personal! I will keep that in mind for the credit card as well. Thanks again!
That’s the point of this article–keep everything separated and your life will be less stressful! 😀
I have recently started a new LLC business. I know I have to pay sales tax monthly on all sales. My question is if I put all the sell money in a business account and I don’t take any draws or payroll money from the business account do I still make any federal deposits on the money in the business account? The reason for not paying myself is that I would like to build the business account up, pay business expenses and when there is enough money to pay me a salary then I will start paying myself. Until that time comes do I pay taxes on the money in the business account monthly?
I have always received a w2 and now I will be going into a field where they want me to create a business but I don’t know which one to pick
Hi Eric, if I made a wire transfer on behalf of my company with my personal checking account, can I expense the wire transfer fee and get a reimbursement?
You can pay yourself back from the company account, and it would be perfectly legal, but you should make every attempt to avoid mixing business and personal funds. If you can’t avoid it, I’d put the money into the business account as a loan, and send the wire from there. And if it’s a large enough sum that will take more than a year to pay back, you need to draw up a contract and charge a fair amount of interest.
I’m a managing member of a multi-member LLC (2 members). Periodically I use the business credit card for personal expenses. I pay for those expenses directly to the credit card company from funds from my personal account; not the business account. This clearly identifies the expense as personal. Is there anything illegal about doing it this way?
Just because it’s not “illegal” doesn’t mean it’s not wrong.
The point of creating an LLC is to have a legal entity separate from the individual members (owners including yourself). That means you should be using the business resources–cash, credit–for business purposes and not personal. If you need money to cover personal stuff, you should be taking a draw, nice and easy.
It will help keep the lines from being blurred in case of legal actions or IRS inquiry.
Hi Eric ,
I am Realtor and the sole proprietor of my S Cooperation. What is the best way for me to pay for my living expenses such as rent , groceries , travel, entertainment and daily costs of living. Is it better to just take out an amount every month to add to another personal checking account or continue to use my business card ? I dont have anyone else its just me.
If you are an S-Corp then you MUST take payroll–actual payroll meaning like with withholding and everything. That is how you should be taking the majority of your money. If you haven’t then you really need to get on that ASAP. I recommend using Gusto as they make it a breeze to manage.
If you aren’t an S-Corp but a sole proprietor, you should calculate a budget and divide it in half, taking one half on the 15th and the rest on the last day of the month to simulate a “salary”. But it should be transferred to your personal account first.
Regardless, you should never be using your business assets to fund your personal life.
Hi Eric, great article!
I do have one question that I have not seen asked, at least not exactly like mine.
Background:
Last year I operated/was taxed as a Sole Proprietor Single member LLC. This year I started S-Corp election, got my payroll running through Gusto, and opened my Business checking account and I’m depositing my business income checks into my business checking account. I also set up an accountable plan to cover home office and health insurance expenses such as the portion/percent of my house used for utilities (water, electrical, internet, phone since I am a web developer I use all of these in some way or another for the business), home office depreciation(I ama home owner) and Health insurance premiums/HSA contributions. I also make SEP IRA contributions to myself from my business checking account(up to 25% of my salary).
Questions:
I recently(this year) got a business credit card with my business EIN.
1) I now pay the phone bill and Internet service directly from it. I am planning on marking the portion of those things I use for the business as a business expense and the rest as owner distribution and paying the credit card charges out of my business account. Is this correct? The reason why I changed it (from paying from personal account and getting reimbursed) is because the business credit cards has amazing perks and cashback for some business expenses including Internet and Phone services.
2) I payed last year’s Self employment tax bill(I was still a sole proprietor LLC so no separate entity, although I was using the same EIN) with this business credit card (it had 0% intro APR) and plan on paying it off through the year from my business checking and marking it as owner distribution as well. Should I, instead, take the owner distribution directly to my personal account and pay the credit card bill associated to these taxes from my personal account, instead?
First, let me state that I would never recommend that anyone claim depreciation on their home office unless it’s a separate structure–it is generally not worth the hassle of having to deal with depreciation recapture when selling.
For the question about the phone/internet expense, you can get away with doing it that way. The problem with your reasoning is that you can start justifying putting more and more of your personal expenses on the business card for the sake of “earning rewards”. Additionally, if you are getting a cash back you can’t apply all of it to the business deduction because part of that “rebate” was earned by your personal use. So you have to be really diligent about how you go about tracking your spending and using your business for personal expenditures.
The question about your taxes is similar–as a Single Member LLC, your tax liability was a personal liability and should never have been paid for with the business card. The best way to do it is to increase your salary first rather than relying on “distributions” to cover all of your personal spending. For one, you would have to have enough basis to support all of the distributions yo are planning. And secondly, you should be careful to not be taking too much of your personal income in the form of distributions vs real salary. That can draw the attention of the IRS for evasion of Self-Employment taxes, but that all depends on your income and personal position in the business.
Hi Erice, I have a client who comingles funds. She has a single member LLC for tax purposes but uses her personal account for business expenses. She claims that is much cheaper to establish and pay business bills through her personal account. For example, mortgage, light, Gas, Comcast, and other bills in her name and not the business name. The business is a personal care home. 90% of the home is used for the clients and 10% is you for herself because she living in the home too. She owns the home before she establish the business as a LLC. Does she have to put these bills in the LLC name?
I would suggest to her that she would be best served sitting with an attorney to ensure everything is structured and titled properly. It’s not so much an accounting issue at this point but a liability issue since she live in the home and would want to have everything separated in a manner that keeps her and the business as separate as possible. The attorney will be able to tell her which items should be set up under the business name in order to protect her from any potential legal actions.
Hi Eric,
I have a partner in an LLC that has been collecting money in the name of our business but having the checks made out to her name instead of the company and depositing into her personal account. The business is in the red and she has used this money to live. The partnership is a general 50/50 LLC. I have no way of knowing how much has actually been taken in. This was sponsorship AD space in a book meant to raise money to help with expenses.
I feel there has to be some illegal activities here.
Hey Jason!
Sorry to say that sounds like something you need to bring an attorney in on.
My partner and i received a bank loan pay expenses for the business to get started, she pays herself a set amount a week should she be paying herself an hourly wage according to what she actually does
out of that bank loan
Hello Aggie
That isn’t something that can be answered based on two sentences. I would suggest you hire an accountant or business attorney and lay out all of the income, expense and partner payment issues and have them draw up either an operating agreement. That way it will be in writing and agreed to by both parties and you will then know how what to do with the funds and everything else that comes into the business going forward.
The comments, questions, and answers are a wonderful supplement to this article. I will try to keep my question pretty straight forward as a way to help myself make things concise and a bit more solid in my head as well. I am a newly established Sole Proprietor (therapist) and aside from rent, business cell phone, and a few small expenses I am a mostly cash in business. My understanding is that it makes sense to open a business act to separate personal from professional. I plan to do this next week once I have a TIN. What I hear is that once this act is established I funnel all my money into this act. Make 1-2 draws per month to cover personal expenses ant that this is not taxed on my personal filing as it will be taxed under my business act? This is my only point of confusion and I just want to prep. Do sole proprietors need to file quarterly? I have heard various things on this side and don’t want to get into trouble right out of the gate. Your thoughts would be appreciated. Thanks for this great forum of information!!!!!
Hey Corey!
So to answer your questions simply:
Hope this helps!
Hi Eric,
Thanks for writing this I have been looking for a well laid out article like this for awhile.
I have a single member S-Corp, I have a third party payroll set up so I can pay myself a salary. If I write a company check to myself as a “distribution”, how and when is that distribution money taxed?
Hey Jake.
Distributions are not taxed as long as you have enough basis. What happens is the net profit from the business goes on a K-1 which you report on your 1040 and is taxed there. Since the tax is already paid, when you take out the profits in the form of a distribution, it’s not taxed again. It’s simply a shift from one balance sheet account to another–not an income event at all.
Thanks Eric, to follow up then.. if the net profit currently in my business account was all earned in 2019 and thus not taxed yet, then I would not legally be able to take any distributions?
You could but there is a big issue I always warn clients about–if you take out distributions during the year in anticipation of a profit, and then you have a downturn or slowdown or surprise expenses, you may have to put that money back into the business or pay taxes on it since you took out more than you were entitled to.
Ok! I’m loving the information and just saw your clarity gig. I’m gonna book with you here in the next week to get all the way into this. Thanks again!
You got it Jake!
I opened a new business account mainly for the travels points; but after I used it and read the info, I am going to stop using it. However, for the things I did use it for–a cruise no less…am I going to be in trouble for using it for a personal purchase??
Hello Kim.
I don’t have enough context and info about your business or the specific way you went about using the account. Basically, if the travel was 100% personal and you didn’t reimburse the business for the payment, it’s not the right way. Not to freak you out or scare you, but there is always a chance that you can get audited or looked at and there is no way to predict who gets chosen.
If you can correct this now you should be good and just be careful going forward when mixing business and personal money. You can absolutely split expenses between the two but the ratio has to be legitimate and defensible, ie: your cell phone isn’t 100% payable from the business account if it isn’t a separate line dedicated to the business.
Feel free to schedule a consultation if you need/want more guidance on the subject at https://clarity.fm/eric-nisall
Hi I have a chase debit business card. I withdrew money from an atm twice from a casino on it. Will I get in trouble by the irs?. It only happened twice.
Hello Esther.
I cannot say whether you will get in trouble or even be audited. The question is “is it worth the risk?”.
No one knows if they will get audited or looked at by the IRS, but the best way to be sure that you will be cleared in the even they do call on you is to do everything the right way. That definitely includes keeping your personal and business money separated at all times and if you have to take business money out for personal reasons (or vice versa) make sure to do it by transferring the money then withdrawing it.
This post was an awesome read! I just want to clarify my understanding of the information gathered from the article.
I’m 21, I’m an entrepreneur, have registered my own LLC, and plan to create a separate business account at my credit union.
In order to spend the money for personal reasons I make through my business (i.e investing / or whatever ), I first should simply transfer money from my business bank account to my personal bank account?
Also, what would happen if I decided to transfer ALL the money from my business account to my personal account?
While I don’t think this would be recommended, I’m new to all this and just curious.
Do you know of any valuable books I could purchase to gain more knowledge on this type of subject matter?
Thanks a million,
Matthew.
Thanks Matthew!
You’ve got it right–if you need money for personal stuff, regardless of what it is, just transfer the money from biz to personal first then go ham with it ?. The key is to have that shift so you are keeping everything separated and not commingling money.
If you are a single-member LLC (meaning you are the only “owner”) and not being taxed as an S-Corp, you can take out every last penny at a given time if you wish. I wouldn’t recommend it because, just like with you personal finances, you should have cash reserves to cover overhead in case you get sick/injured or simply have a bad period of time business-wise.
I am very out of touch with what’s “required reading” lol. i would suggest reading through all of my entrepreneurship articles as I cover stuff that most people online wont–the realities of running a business, not just the sexy topic of earning 6-figs and retiring at 25. You can head over to Amazon Small Business Books for some ideas of what to read.
Thanks!
Hi Eric, thanks for all the insights! When you say ‘transfer the money from business account to personal account’, can this be done electronically online? And vice versa (transferring from personal to business?) Thanks
Hello Mandy!
Online transfers work the same exact way as when you write a check or have the bank initiate a transfer between accounts.
Thank you for this helpful article! I have separate business and personal accounts. I have an LLC sole prop. However, I need a new phone and I use it for both business and personal. I am not sure where I should take this expense from… I know the entire cost of the phone cannot be deducted as a business expense as it is also for personal use. I don’t want to confuse things by taking it out of my business account but I also want to make sure I am treating it as a business asset as well. Any thoughts? Thank you in advance!
Hey Ann!
What I usually do is tell people to purchase it through the business. Then, when you have to book the expense, split it between the telephone expense and the draw account for the respective percentages based on your usage. That way, you are getting the benefit of deducting part of the cost while not trying to take more than allowable.
Thanks for your quick response! Quicker than my CPA! I don’t want to carry debt so I’m going to be paying for the phone in full. Would you do a one time split between telephone expense and draw account that total the full amount of the phone?
Thanks again! Awesome help and article!
My pleasure, Ann!
It would work regardless of how you pay–if it’s paid in full, you do it once and if it’s leased you would simply split the monthly bills. Nice and easy ?
Eric, VERY nice info covered here. However, one thing I didn’t see covered here (or anywhere I’ve searched) is this: For a single member LLC–Is it okay to open a business brokerage account and use it for the LLC’s operating account instead of using a standard business checking account at my local bank? Most brokerages offer checkwriting and will supply a checkbook for the LLC. I would pay all of the LLC’s expenses from it as well as the Member’s (me) quarterly distribution. This way, any excess money in the brokerage account could be invested for the LLC. This seems to make more sense than the LLC’s excess money sitting in the local bank account earning zero interest, which is the case right now.
Hey Robert!
Theoretically, you can do whatever you want with the business money as long as it’s in an account under the business’ EIN. However, I would imagine that each broker has its own set of rules governing the deposits and withdrawals, so it may not be feasible. Besides, why would you want to tie up all of the business money in investments and pay all of the commissions when you have to invest then liquidate, not to mention putting the money at risk.
There are plenty of options for earning interest on business funds without the risk: https://thecollegeinvestor.com/24389/business-savings-money-market-accounts/
Thanks, much appreciated, Eric! Just to clarify, is it okay/legal to use a brokerage account for the LLC’s main operating account? Fidelity Brokerage offers everything I need, including Money Market interest on excess business cash and free checks. But I just wanted to be sure that it was ok/legal to use a brokerage account as the LLC’s only operating account. I can’t find any information that says otherwise.
I work for a newly formed S-Corp. A manufacturing business that was recently purchased by a group of long time employees. One owner owns the majority, and has made a few questionable decisions since the ownership change. He has requested that I do not discuss the finances with the other owners because they have “other things to focus on.” The practice before the purchase (under the old company) any time travel was necessary, the business would provide an advance for expenses. After returning from the trip, an expense report would be turned in, and any unused expense money would be given back to the company, or the employee would be given a check for expenses above and beyond the advance given. Since the sale, the majority owner has taken multiple advances, provided reports, but never reimbursed the company for difference. He has owed a small sum for a few months now. He is traveling again next week, and took quadruple the usual amount to travel than he usually does. Taking his balance to over $6k. Now I realize this isn’t a huge sum of money, but he continually pushing the ethical boundaries. He took his wife on a “business trip” and turned in her expenses as business expenses. He purchases things for his office, purchase clothing with our logo, and other things without reimbursing the company, while the other owners who are employed do not receive any of those “perks.” I’m beyond frustrated because I feel as though he is continuously taking advantage and the other ownership has no idea. I’m scared that if he is willing to do things so early on in the business, how will it worsen as time goes on. How will this ultimately impact the financial health of the company? Help! What do I do? Is there a good way to explain why this isn’t okay? Or am I completely off base and he is within his rights to these things???
All owners of a business have the right to know everything that is going on and have access to any information they want. So technically speaking, the majority owner doesn’t have the right to prevent the others from knowing anything.
How reimbursements are handled are an internal decision. Some companies make employees lay out the money and then reimburse the expenses upon presenting the expense report. Other companies pay for all of the travel/accommodations for the traveler. And some, like yours, do a combination of allowance plus repayment/reimbursement depending on the end result.
If anything is being purchased with the company logo on it, technically it’s considered marketing so it can be 100% paid for using company funds. Now, what he does with his wife’s expenses and other things I wouldn’t be able to speak on because I don’t have access to the books to see how those transactions are being booked.
you can always take one of the owners aside and let them know your concerns in confidence, or just approach the majority owner and let him know that you are uncomfortable with how some things are being done and would like to discuss it. Odds are you’ll be given an ultimatum to either deal or quit, but at least you’ll know that you tried to do the right thing.
My sister was appointed CFO by a family run LLC. All money beyond the initial investment was to be considered a loan to the company at 10% interest. Now, she wants separation and is claiming that she has loaned the company more than she has receipts to prove. In addition, she co-mingled funds for the business and personal accounts making it extremely difficult to separate actual business related expenses from her own. She is threatening litigation. I feel that she should be required to provide receipts and/or descriptions of what each expense was for but she refuses to provide them. Is this something unreasonable for me to expect before paying her back?
Hello Zeaos.
This is something you need to speak to either the accountant or attorney who works with the family on this about. I don’t have enough information nor the background to make any kind of suggestions.
What would be the repercussions of an owner taking large amounts of cash out of the register at the end of the work day for personal use? Wouldn’t that be considered an income and need to be taxed?
It’s hard to say…
Sometimes there will be no repercussions as no one will know. Other times, like under audit, if the money wasn’t reported as income yet was found to have been then a tax bill, plus interest and penalties would be the result. Each case will vary.
A fool and his money are soon parted. Quickbooks are great but if you have a business you better let a qualified tax expert do your taxes. I used tas slayer and got an IRA audit. NOT fun. and very costly, if you have your own business and you are the expert at what you do why would you not hire an expert to do your taxes for you, its their job its all they do you will save so much more on your taxes the tax preparer will more than make up their fee, Trust me I know 1st hand. Oh I know you are smarter than me and would never get audited by the KGB I mean IRS. maybe so but a good professional tax preparer (not H & R BLOCK HEADS) WILL MAKE YOU MONEY
Hello David.
Using Tax Slayer wasn’t what caused your audit. It was either a random selection or something that you put in the return sent up a red flag.
Also, no tax preparer can “make you money” unless they are putting incorrect information on the return or leaving off info, so that makes them nota good tax preparer. Please keep this kind of talk–and the paranoia–off of my site in the future.
Thanks!