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.


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

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