Draw

July 23, 2014  |     |     |   0 Comment

Some small business owners take income from their business as a draw instead of as a salary.

Both terms are essentially the same in that cash is pulled out of the business. But in a salary, withholding taxes are accounted for in the financial books of the business. The business withholds taxes and submits the taxes to the tax authorities.

In a draw, the owner receives the full cash amount with no taxes withheld by the business. Then, the owner pays all tax obligations separately on his personal income tax return.

Author: 

Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.

    Connect with Kris:
  • linkedin
« Back to Glossary Index

Comments are closed.