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If an owner took a draw from the business (sole proprietor…

If an owner took a...
If an owner took a draw from the business (sole proprietor llc) and the business is showing a loss excluding that draw then I assume no income or self employment taxes will be paid since there is a loss? Does it make sense that an owner took a draw but has no tax liability or would you think something is wrong with the p&l?
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Answered in 4 minutes by:
10/15/2017
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,849
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

A sole proprietor LLC pays income and SE taxes on the net income of the LLC. The draw for personal use is not taxed.

The following link contains excellent information regarding this topic:

https://www.thebalance.com/how-does-a-sole-proprietor-get-paid-397448

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 4 months ago
I understand that, but does it make sense to you that an owner could have taken a draw of say $100K if the business lost $66k for the year. This would mean that they made $100K but are not paying any taxes because the business has a loss

Did you read the information in the link I sent?

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Customer reply replied 4 months ago
In my mind the only way my situation makes sense is if there was a profit from a previous year that was never drawn down by owner. Do you agree?

I agree.

Something doesn't sound quite right.

Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,849
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Thank you for the positive rating of my answer. It is very much appreciated.

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