For tax purposes, sole proprietorships pay sole proprietors guaranteed payments as compensation for their services.

Question

Quizplus · Accepted Answer

Sole proprietorships do not pay guaranteed payments to the owner; instead, the owner directly takes the business's profits as personal income and reports it on their personal tax returns. Guaranteed payments are more commonly associated with partnerships and LLCs treated as partnerships for tax purposes, where they are used to compensate members for services or capital.

For Tax Purposes, Sole Proprietorships Pay Sole Proprietors Guaranteed Payments