Clearing up some common Cash Flow Misconceptions

Draws Versus Taxable Income   Business owners often believe that they get taxed on the cash they withdraw from a business.  Generally speaking, withdrawals (aka draws, distributions) don’t drive taxation.  Rather, taxable income is driven by the profits earned by the business, whether distributed or not.  The one exception to this rule is when distributions exceed a taxpayer’s “basis”.  In its simplest form, basis is the accumulated (and previously undistributed) profits and...Read More
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