Anyone a Accountant/CPA?

[sfister65]

Can I get some advise? If you have an equity account and a equity with drawal account for a sole proprietor (spelling), can you only with drawal up to what you have in the equity account? I have a friend I am doing the books for and a CPA set up his equity accounts. He with drawals $750 a month for a business loan he got in his name but the company is paying back. He also with drawals $600 a week for himself. His business is so small he doesn't want to set up payroll. So at the end of the year he'll get a 1099. In about a year and a half the equity with drawal account is going to be higher then the equity account. Should that $600 a week be some kind of labor expense?

If anyone knows, please help.
Thank you for your advise.

[hawkeye3210]

Can I get some advise? If you have an equity account and a equity with drawal account for a sole proprietor (spelling), can you only with drawal up to what you have in the equity account? I have a friend I am doing the books for and a CPA set up his equity accounts. He with drawals $750 a month for a business loan he got in his name but the company is paying back. He also with drawals $600 a week for himself. His business is so small he doesn't want to set up payroll. So at the end of the year he'll get a 1099. In about a year and a half the equity with drawal account is going to be higher then the equity account. Should that $600 a week be some kind of labor expense?

If anyone knows, please help.
Thank you for your advise.

If your friend is a sole proprietor, which would likely report business income on a Schedule C on his tax return, the $600/week is a draw regardless of what is in the equity account. He also wouldn't need to file a 1099 for paying himself as the business is not a separate entity for tax purposes. The business income is going to be reported on his personal tax return.

With that being said, if he set up his business as an S-Corp or a C-Corp, he is going to have set up payroll.

[sfister65]

Can I get some advise? If you have an equity account and a equity with drawal account for a sole proprietor (spelling), can you only with drawal up to what you have in the equity account? I have a friend I am doing the books for and a CPA set up his equity accounts. He with drawals $750 a month for a business loan he got in his name but the company is paying back. He also with drawals $600 a week for himself. His business is so small he doesn't want to set up payroll. So at the end of the year he'll get a 1099. In about a year and a half the equity with drawal account is going to be higher then the equity account. Should that $600 a week be some kind of labor expense?

If anyone knows, please help.
Thank you for your advise.

If your friend is a sole proprietor, which would likely report business income on a Schedule C on his tax return, the $600/week is a draw regardless of what is in the equity account. He also wouldn't need to file a 1099 for paying himself as the business is not a separate entity for tax purposes. The business income is going to be reported on his personal tax return.

With that being said, if he set up his business as an S-Corp or a C-Corp, he is going to have set up payroll.

Thank you. That helps.