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Old 10-29-2005, 07:30 PM
wspeights wspeights is offline
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SCorp Owner Draw Question

I am not an accountant, but do my own bookkeeping. My question involves how to record an owner draw or distribution for an S Corp. What sort of equity account do I create? I already have a common stock equity account (which is set at $100 of common stock)...chart of accounts also shows a retained earnings equity account or do I create an additional equity account? Any help would be appreciated.
Don
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Old 10-29-2005, 10:13 PM
Joey Joey is offline
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Yes, create one called Dividend Draws and charge your draws to that account. At year end, make a journal entry dated 1/1 in the new year to close the Draws into the Retained Earnings account.
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Old 10-30-2005, 01:32 PM
wspeights wspeights is offline
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Thanks Joey.
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Old 11-03-2005, 06:53 AM
Dazey815 Dazey815 is offline
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Joey

Would the same entry be done for a sole proprietorship, LLC or a corporation?
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Old 11-03-2005, 09:52 AM
Joey Joey is offline
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An LLC is not recognized at all for tax purposes. It's a state entity that is created for liability purposes only. A single owner LLC is taxed and keeps it's books the same as a Sole Proprietor and files taxes on the Schedule C of their personal tax return unless they have elected to file as an S corporation. In that case, they follow the S corp rules.
If the LLC is more than one owner, it files and keeps it's books as a Partnership and files a 1065 Partnership tax return.
As for the draws:

Sole Proprietorships use the Owner's Draws equity account.
Partnerships have to track each partner's draws individually so you create a Partner A Draws and a Partner B Draws equity account for each one.
S corps use Dividend Draws as I said before.
And C corporations do not allow draws at all. The owner's MUST take the money out as taxable wages or actual corporate Dividends (just like IBM or PEPSi) and those are taxed once at the corporate level and again at the personal level.
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Old 02-23-2006, 11:09 AM
g1m0b7 g1m0b7 is offline
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I've been confused about how those dividends - where an S Corp shareholder takes cash out of the corp (in addition to some wages) get on the TurboTax Schedules correctly...How do I set up that "Dividend" account you recommend so that it flows through correctly to the tax schedules? Assume a very simple cash basis company with no complications from accumulated earnings, unusual assets or such items. And if we do wait until 1/1 to make that transfer entry, how will that affect the Balance Sheet accounts show on Sch L?
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