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Old 08-11-2014, 10:56 AM
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Join Date: Aug 2014
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Putting money back into your business inquiry

Hi all. Sorry if this is not in the right place.

I have just started an LLC. I believe it to be considered a Sole Proprietorship; the LLC is comprised of only me. I have no partners, no officers, and no employees. I run the business out of my house.

My question is regarding whether or not I am allowed to take some money that the business makes, and put it directly back into the business, without that money being subject to tax. Not being sure if such a thing even exists is the reason I am here. So, let's say that in 2014, the business profits $100,000. Would I be able to take a portion of that - say, $30,000 - put it directly back into the business with the intention of growing the business, and then pay tax only on the remaining $70,000?

Not sure if the question is too ambiguous, and/or if more info would be required for a proper answer. If I need to provide more info, I can.

Thanks in advance.



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Old 08-12-2014, 08:27 AM
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Join Date: Oct 2010
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Quote:
Originally Posted by riffwraith View Post
.

My question is regarding whether or not I am allowed to take some money that the business makes, and put it directly back into the business, without that money being subject to tax. Not being sure if such a thing even exists is the reason I am here. So, let's say that in 2014, the business profits $100,000. Would I be able to take a portion of that - say, $30,000 - put it directly back into the business with the intention of growing the business, and then pay tax only on the remaining $70,000?

Not sure if the question is too ambiguous, and/or if more info would be required for a proper answer. If I need to provide more info, I can.
.
>NO. A self-employed business owner does not usually take a salary. Instead, he or she makes an initial investment (capital contribution) in the business from personal funds and during the course of the business takes money out as draw and invests more money, from profits or from personal savingsyou need to pay tax on the taxable net earnings of $100k, not on only $70K.Then after you pay taxes, you can transfer $30k of the after tax dollars into your SMLLC;on the contrary, Owner's draw decreases the owner's capital account. Typically, a check is written on the business account to the owner and it is deposited in the owner's personal account. The draws are not taxable income. As a sole proprietor, you are taxed on the net income of the business whether you take draws or not so it is the net income of the business that determines your tax.



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Old 08-13-2014, 11:20 PM
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K, thank you.



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