I have recently started a company and used some of my savings to start it. That sum of money would be categorized as owner’s investment...correct?
Might be a silly question but is owner investment a expense or income for the company.
once the company is profitable I could do a owner investment draw...how would I categorize that in QuickBooks. Would that be considered an expense for the company, would I have to pay taxes to get back my investment into the company?
if I put 20k as an investment into the company.
the company after 1 year is profitable - 50k
I do a owner investment draw of 20k, then does the P/L for the company say profit of 30k?
Owner funds, in or out, is equity. Your original infusion of cash is Owner Contribution, an equity account. Withdrawal of money to owner is Owner Draw, also an equity account. Equity represents your ownership value.
If your company books show a year end profit of $50k, that is what passes through to your personal return, $50k. Taking out cash or leaving it in the company has no effect on profit and the personal income tax bill. You can have a $20k paper loss but withdraw $50k of company funds if the money is available. It is yours to do with as you please