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Owners draw/contribution and a negative "owners contribution"

dontworryaboutitdontworryaboutit Member Posts: 20

I took a draw from my S-Corp SMLLC and my balance sheet "owners contribution" equity amount is negative. Is this a poor way to account for owners draw?

Total equity which includes "Retained Earnings" is positive overall. Its just "owners contribution" that is negative.

in Accounting Technical Support

Comments

  • JulianPJulianP Member Posts: 1,002 ✭✭✭

    Hey @dontworryaboutit !

    Do you mind clarifying how your are recording your withdrawal? If you you are pulling funds out of your business, you will want to record this as an Owner Drawing withdrawal transaction that is categorized as "Owner Investment/Drawings".

    If you only pulled funds out of your business without putting any in (owner investment), then your owner contribution balance would be a negative value.

    edited January 21, 2021
  • CyrenaJoCyrenaJo Member Posts: 9

    I have a similar question (I think). We regularly pay the owner of our S-Corp as a "Draw". I've just started using Wave and am not sure where to set this up. Do I create a category named "Owner's Draw - name of owner" under the Retained Earnings (Equity) or under the Business Owner Contribution and Drawing (Equity) or something else entirely?

  • JulianPJulianP Member Posts: 1,002 ✭✭✭

    Hey @CyrenaJo !

    When I business owner is looking to pay themselves, there are 2 ways to record this in Wave:

    1. You can record a personal Owner Investment/Drawing expense transaction. Owner Investment/Drawing is a category used to keep track of the money you pay into and take out of your business. With this method, Wave won't generate payroll tax forms for you however. If you'd like to create a separate Owner Investment/Drawing equity account for a specific business owner, you are more than welcome to do so but I suggest discussing this with a professional accountant to ensure your workflow is accurate.

    2. With our Payroll feature, you can add yourself as an employee and assign yourself a salary/hourly pay rate. If you don't have a fixed pay rate, you are able to change your compensation rate via your employee file. Please note, we recommend setting an annual salary if possible. I do want to mention that, when adding yourself as an employee, you will need to list a different email address than the one used to create your Wave account. An employee having the same email address as an employer can cause errors in the system.

    To learn more about Wave Payroll, feel free to check out the Help Center articles below:

    edited April 26, 2021
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