Originally Posted by SwishFiona
why can't I just do what I did when we were a partnership and pull money out as profit, and get taxed on it that way????
You can. It's called drawings. But some accountants don't like you doing this in a company because of the risk of taking too much money out of the company.
Given that I'm working with Kiwi tax, I won't go into specifics, but a company is a separate "person". At the end of the year, your current account is "credited" with the company profit, which should be enough to offset the amount you've taken out. (Funds introduced, less drawings and other personal payments, plus salary, = balance in current account). Your current account needs to be "in funds" at the end of the year, otherwise you have borrowed from the company. In NZ, you need to pay interest on this borrowing from the company (because otherwise you'd have to have borrowed it from somewhere else).
My preference is always to take drawings, and to have savings set aside for tax, for three reasons
1. If you don't make as much profit, then taking salary forces the company into a loss, and you've paid too much tax
2. If you make too much profit you need to square up your end of year profit in April on the final month of PAYE/G payments (maybe kiwi specific)
3. If your profit is less than xx (in NZ$70k), there is no extra tax to pay as an individual.
The only time I am more happy on PAYE is when the individual is simply unable to save for tax.
I'd suggest you talk to your accountant, or maybe another accountant (there are a few CA/CPA's on FS) - you need to be comfortable in your head about how the profit is taxed. And it might be that you need to revert a partnership - sometimes this is a perfectly valid option.
It seems to me that you are dealing not just with the tax question, but also with a business that isn't making what you need, and again, I'd start with your accountant. One thing you can specifically ask for is a benchmarking comparison against your peer group, and this will show you compare with others in your industry
All the best