Business: Startup and Grow


Turkey Withdrawal


I guess I have written more than once about the need for good character and integrity in running a small business and applying for loans,   but….

A common problem we run into involves tax returns from businesses that deal mainly in cash.  Small businesses usually do not have fancy CPA prepared financial statements,  so the primary way we have to see how things are going is the tax return.

What too often happens is we are shown losses or skimpy profits while the owner has a big expensive home and drives up to the bank in a Mercedes.  When we question this we get a “wink,”  implying some of the revenue may not make it to the tax return.  We can’t make a loan based on what does not show up. 

While we are not agents for the IRS,  I have always had a simple rule:  If the reports show enough for the owner to reasonably live on and to service the debt anything else is between you, God and the IRS.

In a strict sense,  if a sole proprietor running a grocery store takes a turkey home,  is it a business expense or owner withdrawal ?  Happy Thanksgiving

Categories: General
Doug Kallenburg

7 Responses

  1. Terence D. says:

    I think this is vitally important, because a family member of mine used to have store, and started to take things “here and there” for home, and soon “here and there” became a habit, and that’s why they “used” to have a store. It’s important to get in the habit of doing things the right way, instead of seeing what you can get away with, because it will have latter effect down the road.

  2. Patrick K says:

    I believe business owners need to reflect on the salaries they take. The vital and simple question they should ask themselves first is- Do I need this money personally, or would it be more beneficial to keep it in the business to expand and grow? It is important to take some sort of salary. That’s how you live, but be conservative. From my point of view the bigger issue is not a matter of hiding money from the IRS- it’s a matter of business owners taking too much for personal compensation.

  3. Renata5612 says:

    I definetly agree with Terence. I see at the place where I work that a machine needs to be fixed, but there is no money. But there is money to pay for their personal gas and other misc items. I guess for future business owners to make sure you stay in check, and also fair to the rest of the people in the organization.

  4. Gerry Picolla says:

    Bottom line, you cannot rob peter to pay paul. We all know someone who’s done this with personal finances. It’s critical to develop good habits early, learning how to use credit, not float on it.

  5. Ricky S says:

    I think what you mention in this article some business owners consider a perk for owning their own business but in the end it could lead to their demise. It is understandable taking things here and there but as you sad when the company reports little profits and the owners have the mansion on the hill overlooking the lake you kind of wonder where that came from. This may seem like its treating the business owner well until they get caught and pay the price.

  6. jackie keto says:

    personally if someone drives up in a Mercedes, with 3 more at home (one for each season of course) and has a house bigger then the building i have my classes in, and report that they are making MINIMAL profits, then they are full of ‘anything but the truth’ (or insert your favorite word here)… OR they have a rich sugar mama, or come from money, which is unlikely, the whole point of a sugar mama is to NOT have to work. anyway to have to nerve to apply for a loan when you pull up in a Mercedes is ridiculous. as for taking a turkey home… if you own the grocery store, then you own the turkey, you can choose to do with it as you please. same as if you decided to charge $1 for it or $50, your store your choice. but that better be some darn good turkey if its $50, me personally i dont like turkey either way.

  7. KM says:

    I agree with Ricky, there are many business owners that view the things mentioned in this article as a perk to being the owner but there are some business owners that take it to extremes.There are just certain things that you should not do if you are the owner becasue you are supposed to be setting an example for your employee’s to follow and the owner would not be very happy if all their employee’s were taking things from the business just because they could.