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Restaurant BizTalk

A forum for restaurant owners, managers, and other industry professionals.

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delimam Joined
Mar / 2007

Owner's Draw vs Paying Myself a Salary

I am a sole proprietor. Does anyone know whether is better to take an owner's draw or paying myself a salary. I receive social security benefits and pay an self employment tax.

Big JohnJoined
Jul / 2004
Big John

It does not matter how you characterize your earnings. When you are a sole prop all of your earnings from Schedule C on your 1040 are subject to Self Employment tax.

bassrocker4u2Joined
Feb / 2007
bassrocker4u2

thats true, big john. the only advantage of paying yourself a salary, is this. the business has more of a chance to grow a substantial cash -flow, if owner is not drawing from it. you basically are budgeting better, with a positive result, making it easier to upgrade equipment, or meet demands of many other growing needs. some say you should incorporate, and receive a salary. this, will open two different sets of tax rules and books. but, your personal property will be safe from any potential lawsuits. this is always a good idea, if you have employees. you wouldnt want to lose everything, becasue of a "hired mistake". the advantage of being a sole proprieter, is you can write off so much stuff, that you can probably forego paying any income tax. you said you receive ss benefits, and pay se tax? just curious, do you have employees, or is it a one man band? makes a difference in the tax world. restaurant folks should take a course in taxes, and push the cpa aside. save yourself a ton of money, and utilize tax breaks that you wouldnt otherwise know about.

LindaJoined
Feb / 2005
Linda

Quote:restaurant folks should take a course in taxes, and push the cpa aside. save yourself a ton of money, and utilize tax breaks that you wouldnt otherwise know about. Very wise words. Even if you keep the cpa, you'll at least know where the money is going and why. The more you know, the less it'll cost you in the long run. ~ Linda

delimamJoined
Mar / 2007
delimam

Thanks everyone for your replies. Bassrocker4u2. I am retired and receiving a monthly social security benefit. After retiring from a major restuarant, I decided to open my own cafe. I have one employee working with me. I am a little confused by your question though. Should I not be paying SE taxes? Do you have any suggestions on where I can take a course on taxes?

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