If I were the owner of a company, how would I extract profit?

Question

I'm not clear on the concept of receiving cash from the profit my business would make, whether it is a sole proprietorship or a limited liability company / private limited company. How is this written into the books and what is the accounting term for this?

ps

Thanks for the replies, your answers gave me the right terms to search for and I found this, which answered my question perfectly -

http://www.toolkit.cch.com/text/P12_7410.asp

Answer 1

My husband and I own an Electrical business, which is an LLC. When he gets paid from builders, we deposit all checks in ou r business account, then pay our tax account, pay employees, materials, then we figure how much we need for us that week and write a check to our personal account for which we label as equity.

Answer 2

I believe it is known as a Note Payable Stockholders Loan, it is considered a current liabilities on your GLs. Because most business owners especially LLC's have invested tremendous amounts of their own money uncharted and unaccounted for over the years of a business the business always owes the owners money back. Any profit isreally considered money not profitted because the company owes the owner money. Unless you are a very successful business like Bill Gates. Be careful though make sure your business can afford this removal of cash. I have bookkeeped for a few who thought the business owed them so much they ended up loaning themselves right out of business.

Answer 3

If you're the owner then that's a decision you get to make, both for yourself and the other employees, if there are any. You can pay yourself and others by the hour, a flat salary, a salary with overtime, or a percent of profits. It's just another business expense.

Answer 4

If you are the owner of an LLC, you can not draw wages or a paycheck. You can take guaranteed payments, however.

You can always check with your CPA to make sure you are doing it the right way.

Answer 5

Pay yourself a salary with bonuses that way it can be accounted for on the books.