3:20
Donna Bordeaux explains when business owners need to be on payroll. S Corp owners must take a W-2 salary and pay themselves reasonable compensation. Sole proprietors and partners typically don't need payroll.
Donna Bordeaux explains when business owners need to be on payroll. S Corp owners must take a W-2 salary and pay themselves reasonable compensation. Sole proprietors and partners typically don't need payroll.
Hi, I'm Donna Bordeaux with pyopaccounting.com I get a lot of questions, especially with the PPP loan issues going around about putting yourself on payroll or putting the owners of the business on payroll. And, and there are a lot of different opinions when you start to look around as to yes or no, should I be on payroll? But this is a really critical decision and it really depends on how your entity is taxed to determine the proper answer for you. So I'm going to give you some clues as to how to look to determine how you should be paid as an owner of your studio. First off, if you file a separate tax return for your business altogether, that would be an S Corp and Form 1120, a partnership form 1065, or a corporate return form 1120, those are all separate entities and you will have one set of rules. Many of you may be sole proprietors, which means that you file a Schedule C and it is included in your standard 1040 in your personal return, it does not have a separate return. So those are the choices for tax returns. Now, you may be an LLC that is a legal entity, not a tax entity. So you'll need to refer back to how you file and pay taxes. If you are a Schedule C sole proprietor or a partnership filing Form 1065, that means you have more than one owner of the business. You should not receive a paycheck. You will not receive a W2, so you may not be on payroll. You will have a whole separate set of rules. If you are filing as a corporation or an S Corp, you will be on the payroll. Now, as an S Corp, you must be on the payroll if you're profitable. There are requirements for having reasonable compensation as an S Corp owner, so I hope that clarifies for you as to whether or not you should be on the payroll. If you have questions about this, feel free to comment below. We'll watch for those comments and help you get through this process. Process. Thank you very much. I'm Donna Bordeaux with pyopaccounting.com Please remember to subscribe to our YouTube channel and follow us on Facebook. Check out our website as well. We've got a blog with a lot of content specifically for studio owners. Thank you very much. You have a great day. Sam.
