Being the owner of your S-Corp affords many benefits that you can take advantage of.
For new S-corporation owners, and even many seasoned business owners, understanding how to utilize these benefits can be as challenging as understanding a foreign language.
It is important for you to remember that all of your personal income from the business does not need to be in the form of an employee wage. You can take owner distributions on top of your wage. Review our article about how the owner of an S-Corp is paid.
Always be sure to document these distributions. We have prepared this resource to teach you how to properly document these distributions.
First things first, what is a distribution?
A shareholder distribution is not an expense; it is the company paying the owner his or her share of profits from the company.
There are different ways to take a distribution.
- You can write yourself a check
- Make a bank transfer from your company account to your personal account
- Or take cash from the ATM.
That’s it!. Just take the money…but wait, there is one more step.
How to Track Distributions
Don’t forget to keep track of what you take out of the company. Tracking is the most important step. If you have QuickBooks, record this payment the same way you would a regular check as if you were paying bills.
Steps: Make the check payable to you. The account to charge will be Distribution (or owners draw), which is an equity account.
An alternative to recording a payment in QuickBooks is to create a journal entry.
Steps: Debit Distribution and Credit Cash for the amount you are taking.
Track on Paper or Excel file
If you keep track on paper, simply write the date, amount and a running tally on a sheet of paper. Keep track of this from January to December of each year and bring it to your tax appointment. We have created a downloadable excel file for you to track your distributions.
Your Dedicate Business Accounting Advisors
Often business owners are excellent at executing their industry specific skills all the while they are just getting by with the bookkeeping of their business. This is normal. As your team of advisors, we are here to answer your questions and teach you to properly account for your income and expenses.
When the daily tasks of bookkeeping become too much for you to stay on top of, ClearPath Advisors offers a variety of levels of bookkeeping and payroll services. Contact us to learn more about how we can serve your business and free you to excel in your business.