I am starting up a buisnessand putting my own money into it. Do I pay taxes on the money when I pay myself bak
Answer:
Generally speaking no. This should be recorded as a loan. When you cut yourself a check from the company, just put "repayment of loan" in the memo section and double check to make sure your accountant is recording this correctly.
Keep in mind if your business is a partnership or sole proprieter, your taxes will be figured at year end based on your net income after expenses. Because of this, you can cut yourself checks without much of a double taxation problem.
But if you incorporated, that is an entirely different matter because the IRS looks at a corp as a "seperate entity" (think of it as another person) and any "income" you take from the company should be withheld on and taxed like you are paying any other employee.
See an accountant concerning this, a lot of small businesses fail because they do not keep their accounting system in order. My advice is to interview 3 or 4 accountants and ask them their opinion on taxation, you will find the one that best suits your own personal style.
And of course, good luck to you in your pursuit of the American Dream!
You don't have to pay taxes on the start-up capital that you return to yourself. Just make sure you account for it in your records as a return of capital and not as profit from the running of the business.
You pay taxes on the net income of your business. Pay back of your investment is not income by that definition.
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