Question by  Danielle42 (78)

Are owner's draws considered a business expense?

Owner's draws are a bit beyond my experience.


Answer by  Chaneygirl (1755)

Owner's draws are not a business expense. They do not affect income. They will affect cash flows, but not income. Generally, a business owner pays tax on the income of the business regardless of the amount of draws.


Answer by  shugaree (28)

Owner's draws are considered a business expense only if you are set up as either a S-Corporation of C-Corporation, not as a sole proprietorship or partnership.


Answer by  jon6 (488)

No! An owner draw is removing equity from your business. It is not something you can count as an expense and deduct for tax purposes. It's simply taking money you invested in your business back out of the business


Answer by  Miles (15)

Any owners draw would usually be considered a liability. This is done to balance out the cash transaction on the balance sheet. A common way for this to be reflected is through a note payable to the owner. Depending on the company structure, this may or may not have a payback period associated with it.


Answer by  Adelaine (42)

No, owner draws (or "distributions") are not taxed or are considered deductions on the business's tax return. Distributions only affect the cash account.

You have 50 words left!