How do business owners get paid?
Say I own 50% of a doughnut shop. The store brings in $500,000 a year in GROSS revenue. The NET income after all costs, expenses and taxes is $25,000, how much goes into my bank account?
- JohnLv 71 month ago
Not much of a business, you should close it down. If you are a sole proprietor all of the money is yours to keep. That is net, of course you have to run the business properly and pay taxes. A straight, basic partnership might be the same - all of the money is yours, you just split it in half. A partnership will likely have a contract that could alter that or not.
- EvaLv 71 month ago
Maybe nothing. You will pay taxes on your share of the profits ($12,500) but that doesn't mean there is that much cash available for you to withdraw. It also depends on what tax entity the business is. It could be a partnership, S Corp, or C Corp.
- SuccessLv 61 month ago
You SHOULD get $12,500.00 but ONLY if the partnership agreement states that you get that distribution at the end of the year. If the agreement says the net profits are rolled over to the next quarter...or if it states that the partners get less than their share of the net profit then you would get that.
In some cases, though, the distribution of profit is based on a formula which puts your distribution amount into the operating expenses...in which case you could be getting 5%(or more ...or less) of the GROSS profit ( at 5% that is $25,000.00) and the company is putting THAT amount as an expense in order to reduce the taxable income so the company pays less taxes. (good for you)
So...read your partnership agreement CAREFULLY...or have a CPA review it for you. Somewhere it states EXACTLY how much (or what percentage of what) that you are entitled to.
- BrianLv 71 month ago
If you own 50%, then you should get half of the 25,000. So you'd get 12,500.