Lic. Mauro Esquivel Informs
When a Business Owner Withdraws Money from the Business Account
AUTHOR: Mauro Esquivel
The main recommendation before withdrawing money from the company is that, as the owner of the business, be clear about what figure or mode you will use, be it per diem, dividend, as a payroll employee or on loan. Of course, it's important to have discussed this with your accounting advisor and not wait until the end of the fiscal year to see what to do with the money you've taken out of the company.
It is important to have separate bank accounts, that is, not to use the same company accounts for personal expenses and pay daily household expenses from there.
Five healthy ways the business owner can withdraw money
- If, in addition to being the owner, the person works for the company, they could be on the payroll. This clearly has a double cost. The 10.5% that you must pay to the CCSS as an employee and the 26.5% that you contribute as an employer. In addition to the salary tax if it exceeds ¢863,000.
- If the owner is part of the Board of Directors, they can receive allowances, which pay a 15% retention to the Ministry of Finance. To do it this way, there must be a minute in the Board of Directors Assembly Book about what was discussed in the session for which he was paid.
- As a shareholder, you can also receive dividends, which also pay a 15% tax to the Ministry of Finance.
- If you incur travel or business-related expenses, you can request the invoices in the name of the company and they will be reimbursed. Here the most common question is what kind of expenses can I include? This depends on the nature and type of activity of each company.
- Another option is for the company to make a loan to the owner. This implies recording it as an asset on the Balance Sheet level, that there is a private contract between both parties and it is recorded in the Shareholders' Assembly Book, with the terms and conditions of the loan. Of course, it is understood that the owner will return the money to the company.
The most common problem is that the owner simply withdraws money from the business without any backup.
Take into account that, if it is about expenses or travel expenses related to the business, it is best to request the invoice in the name of the company. If it is personal expenses, such as the children's classes, even if you have an invoice, it will never be a deductible expense.
The main risk that a business owner takes money in a disorderly manner is when he includes as business deductible expenses all his personal expenses that were paid without having any support or figure as explained above.
Then, in a Treasury review, they can remove all these expenses from the income statement and collect the corresponding tax with their penalties and interest.
Any person who owns a company must keep the business accounting in an orderly manner and separate from personal accounting. It's never too late to get your business and finances in order!
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