J.K. Lasser's Small Business Taxes 2023

CHAPTER 25Distributions from Your Business

• Distributions from a Sole Proprietorship
• Distributions from a Partnership
• Distributions from an S Corporation
• Distributions from a C Corporation

Alert

At the time this book was published, Congress was considering tax changes that could affect 2022 tax returns and planning for 2023. Check the online Supplement in February 2023 at www.jklasser.com or www.BigIdeasForSmallBusiness.com to see what changes have been enacted and when they become effective.

Let's face it. One of the main reasons you're in business is to be able to get something monetary out of it. From a tax perspective, distributions to you from your business may or may not be taxable, and if taxable, handled in various ways. It depends on the type of your business entity and other factors. Some of the rules for distributions are very complicated. The following is merely an overview of the tax treatment of distributions.

Distributions from a Sole Proprietorship

As a sole proprietor, you pay tax on net income from the business, regardless of whether it's distributed to you. When you take money from your business bank account, it isn't taxable to you.

Distributions from a Partnership

As in the case of a sole proprietorship, you pay tax on your share of net income from the partnership, whether or not it's distributed to you. In determining whether or to what extent a distribution is taxable to you, keep both your inside basis and outside basis in mind (explained ...