Draw
July 23, 2014 | | Kris Tabetando | 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
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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