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The Rules of Paying Yourself a Bonus, Part 1

What you need to know if you're a sole proprietor or a one-member LLC

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If you are a sole proprietor or a one-member LLC, the dollars you take out of the business are considered a distribution of profit and have no effect on your tax liability. You can pay yourself by merely writing a check whenever you want the money. This distribution doesn't require the withholding of any payroll taxes or the filing of a W-2. Although you cannot pay yourself wages, you can take dollars out (as a family unit) by paying your spouse and/or children taxable wages for working in your business. Additionally, since your business dollars are considered your personal dollars, there is no formal way to loan dollars to your or one-person LLC business. This means that loan repayment (plus interest) is not a viable way to take dollars out of businesses having either of these two forms of business ownership.

Source: "Taking Profits Legally--and With Minimal Tax Impact"

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