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General Accounting Discussions: For a sole -prop, when partners take money out, classified as withdrawals or wages?

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  1.  
    • CommentAuthorBriana
    • CommentTimeJul 6th 2008
     
    I'm working on a small sole proprietor company. There are 3 partners, and they withdraw money for the work they've done and for mileage. Would I classify that as wages, or withdrawals (in a 3000 account)? If I use withdrawal accounts, when I start a new year, all the withdrawals from the previous year will still be there. Is this right?

    Thanks in advance.
  2.  
    If there are "3 partners" then the company is not a sole propreitorship, it is a partnership.

    When the 3 partners take money out of the company for work performed you have what is deemed "guaranteed payments" to each of the partners. Such payments are taxable as ordinary income and also subject to payroll taxes.

    Mileage, if handled as an "accountable plan", is an expense to the partnership and is not taxable income to the partners.

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