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FYI: You can’t “not draw a salary” and get that profit out of the company. IRS mandates that you pay yourself a reasonable amount, and pay (eye watering amounts
by ein0p 3y ago
FYI: You can’t “not draw a salary” and get that profit out of the company. IRS mandates that you pay yourself a reasonable amount, and pay (eye watering amounts of) taxes on that amount. You can’t circumvent any of that by just taking everything as distributions.
- mtlynch 3y agoAre you sure you're not thinking about corporations? TinyPilot is a single-member LLC, so all the income is on my personal tax returns. When I said I don't draw a salary, it was to prevent confusion about whether payroll includes me.
- tgtweak 3y agoI don't think there were any insinuations that that was after-tax income in his personal bank account - just that the company earned that much in the previous year and it could be paid out (dividends or otherwise) after much in the way a gross salary would be.
- ein0p 3y agoFor single person LLC (as the OP said) it doesn’t make any difference - they’re paying all taxes on the entire amount and then just deducting business expenses. IOW their business account does not require any special treatment. For corps (including S corp) there’s often this temptation for the founders to pay themselves the bare minimum and skirt some of the taxes (social security for example). I was pointing out that this is a good way to draw unwanted attention.