@teleserv wrote:
Let’s say the total revenue my business generates this year is $400k. I take $100,000 in salary. And the business has $100,000 of expenses. And I take a $50,000 distribution. So I personally have earned $150,000 in income and the business has a net profit of $150,000.
If the business had gross income of $400k, you took $100k in salary, and the business had $100k in regular business expenses, then the net profit would be $200k ($400k - $100k - $100k).
Your salary will be reported on your W-2 and that salary will be deducted from the corporation's gross income. Your K-1 should then show ordinary business income of $200k (on Line 1 of Part III).
The $50k distribution you took does not have an impact on the corporation's net income (i.e., does not reduce net profit) for its tax year.
