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Sole proprietors pay and wage laws.

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  • Sole proprietors pay and wage laws.

    A sole proprietor with no employees works 500 hrs in a new business in the 1st year. He takes no draws during this 1st year, and instead keeps the money working in the business. He has no formal written document stating how or when he will be paid, but he is aware he can take a draw at any time.

    He is not avoiding draws to avoid paying taxes, as HE KNOWS he has to pay taxes on net profits regardless of draws, but rather to grow his business more quickly.

    Given these set of facts, is there a universal way the law views what his status is in-fact? For example, b/c he has no written document on payment, but worked 500 hrs, would the law deem he has deferred compensation of least the applicable minimum wage multiplied by 500 hours?

  • #2
    Re: Sole proprietors pay and wage laws.

    The interpretation as to the facts would be different depending on what the outside evaluations purpose was. Presumably, he has been enjoying 'perks" even though he has not drawn a salary.
    Due to a recent promotion, I should now be referred to as Major Obvious.

    I would not be trying to provide information and knowledge if I did not sympathize.

    Some days it is just not worth chewing through the restraints to face life.

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    • #3
      Re: Sole proprietors pay and wage laws.

      Sorry, but once again, we don't do homework here.
      "If it ain't in writing, it never happened."
      "A lack of planning on your part does not constitute an emergency on my part."
      "You can never make the same mistake twice, because the second time you make it, it's not a mistake, but a CHOICE."

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      • #4
        Re: Sole proprietors pay and wage laws.

        Originally posted by pandab View Post
        A sole proprietor with no employees works 500 hrs in a new business in the 1st year. He takes no draws during this 1st year, and instead keeps the money working in the business. He has no formal written document stating how or when he will be paid, but he is aware he can take a draw at any time.

        He is not avoiding draws to avoid paying taxes, as HE KNOWS he has to pay taxes on net profits regardless of draws, but rather to grow his business more quickly.

        Given these set of facts, is there a universal way the law views what his status is in-fact? For example, b/c he has no written document on payment, but worked 500 hrs, would the law deem he has deferred compensation of least the applicable minimum wage multiplied by 500 hours?
        As a sole proprietor, he is able to pay himself whatever he wishes -- and will pay taxes on the business revenue or personal. The law will not set his compensation for he is the owner of this one man business and makes the rules. As long as taxes are paid on the revenue, the IRS will be satisfied. And no labor board will step in to determine what a one-man operation pays himself. Or does not pay himself. Most startups devote 72-hour and up weeks to get their business off the ground.

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