An owner’s draw involves withdrawing money from the business for your personal use. However, it's important to note that opting for an owner’s draw will directly lower the business equity, subsequently resulting in a decrease in available funds for ongoing business operations.
Not all “owners” are eligible to be paid an owner’s draw. Sole proprietors and partners are able to take advantage of the owner's draw from company profits. Other business structures require more consideration because of how their business profits and losses are treated for tax purposes.
The owner’s draw differs from a salary because payroll taxes are not withheld from the amount reported on the draw.
Setting up and paying owners a draw in Fingercheck is simple. This article will provide you with the following:
Add the Owner's Draw earning code
Add the owner to Fingercheck
Pay the owner
Owner’s draw reporting
Add the Owner's Draw earning code
Log in to your Fingercheck account as an Administrator.
Go to the SETUP tab > Payroll > Earnings.
Click Add.
Select the predefined template for Owners Draw:
Click the Add button for that template
Click OK in the confirmation window that appears to proceed with adding the Owners Draw earning code.
Click OK in the confirmation window that appears.
Click the X in the top-right corner to close the Add Earning panel.
The earning code appears in your list of codes.
Add the owner to Fingercheck
Log in to your Fingercheck account as an Administrator.
Click the EMPLOYEES tab.
Click New Employee on the right side of the window.
Complete the wizard to add the owner..
Pay the owner
The owner needs to be paid using the Owners Draw earning code set up with the code OD.
Log in to your Fingercheck account as an Administrator.
Select the Payroll tab.
Click Run Payroll to begin the payroll process.
From the Payroll Entry, or Step 4, of the payroll process find the owner on payroll.
Next to the owner’s name click the Quick Actions menu (Hamburger) icon.
Under the Earnings tab, click Add.
From the Earnings dropdown menu select the OD earning code.
Enter the earnings amount.
Click Save.
Owner’s draw reporting
Fingercheck can’t provide financial or legal guidance when paying the owner’s a draw. We recommend owners discuss their financial needs with their CPA or accountant.
Please note the following for paying owners a draw:
The owner will be responsible for reporting all draw amounts when they file their personal and business taxes.
Owner’s draws will not be reported with federal and state quarterly taxes.
If an owner was previously paid under a different earning code, please reach out to Fingercheck support to discuss voiding and reissuing payments.
If the owner was paid under a different earning code in a prior quarter/year, amendments will need to be filed to correct payroll reports. Please reach out to Fingercheck support to discuss corrections.
Watch how easy it is to set up and pay an owner's draw with Fingercheck: