Focus On Bookkeeping
by L. Kenway BComm CPB
What You'll Find In This Chat
✔︎ Sole Proprietor Draws
✔︎ Owner-Manager Options
✔︎ How To Reimburse Yourself For Business Expenses Paid With Your Personal Funds
Paying Yourself was first published in The Bookkeeper's Notes on August 15th, 2012. I've revised the chat and publish it here for your reference.
It can be
confusing to the small business owner on how to go about paying
yourself. Is the money taxable or not?
As you've probably guessed, this
is not a yes or no type of question. It depends ... on whether you are a
sole proprietorship, partnership or corporation. Let's discuss the best bookkeeping practices on how to pay yourself.
Sole Proprietors and Partnership - Paying Yourself Through Draws
What you need to know ...
Ways for Owner-Managers Can "Pay" Themselves
If you are the owner-manager of an incorporated business, then ...
- You need to become knowledgeable about the rules surrounding shareholder loans; and
- Be cognizant that you are now an employee subject to all the rules surrounding payroll and the mandatory source deductions required.
- Owner-managers do NOT take draws. Your sole proprietor days are over. You have other options to remove monies/assets from
the corporation. Some options are taxable and some are not. Follow the above links to find out what they are.
- YOU need to
be careful that money/assets removed from the company are not at risk to
- Best practice when deciding on the best method to pay yourself ... as this is a complicated area, you should put remuneration
on your list to discuss with your accountant. Better to be safe than crying over spilt your milk later.
How To Reimburse Yourself for Business Expenses
- Whether you are a sole proprietor or an owner-manager, you need to remember there are slightly different procedures if you are reimbursing yourself for business expenses paid for with your personal funds.
- Filing expense reports with source documents attached becomes an important habit if you want to keep more money in YOUR pocket at tax time! Follow the link above to learn the best practice for doing this.
- Check out Expensify if you are into paperless recording keeping. I love when my bookkeeping clients use it.
See you on the next page ...
Your tutor Lake