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Dynamics 365 Community / Forums / Microsoft Dynamics AX (Archived) / Best practice to distr...
Microsoft Dynamics AX (Archived)

Best practice to distribute (pay) profit distributions to company owners

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Posted on by bbaker 60

What is the best practice for the following for a S-Corp?

  1. Pay profit distributions to the company owners.
    1. Can or should you do this via payroll outside of taxes?
    2. Or should you set up a vendor account for each owner?
  2. Best method to track the amount owed to each owner.

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  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at
    RE: Best practice to distribute (pay) profit distributions to company owners

    Hi,

    Can you explain the term S-Corp?

    How many owners do you have to male a payment to?

    If you only have a limited number you can set them up as vendors and pay them through a payment journal.

    If you have many and do not want to track the information in AX - for example for security reasons - you better make the payments outside and only create a summarized GL transaction that does not allow tracking which owner get what amount. That is what I'm used to.

    The amount owed to reach owner must be specified in some of your contracts. Not sure if you want to hold this information in AX for security reasons. Please see my previous argument.

    Best regards,

    Ludwig

  • bbaker Profile Picture
    bbaker 60 on at
    RE: Best practice to distribute (pay) profit distributions to company owners

    Thanks Ludwig. S-Corp stands for subchapter S corporation. It is a type of corporation which is closely held by few individuals. Also all corporate profits are allocated to the stock owners no matter if a profit distribution is made to them.

    My issue with setting them up as vendors is that other's can see them. I've used the address book security to prevent some of this but we are seeing issues with it since it is difficult to make the security work for all people.

    I was wondering if we should be using payroll with an earning code which isn't taxed or receive benefits, etc.

    If not, how do most AX users pay profits to their stock holders?

  • Suggested answer
    Ludwig Reinhard Profile Picture
    Ludwig Reinhard Microsoft Employee on at
    RE: Best practice to distribute (pay) profit distributions to company owners

    Hi bbaker,

    If security is an issue, I would record the transactions outside of AX and only record the payments and transactions on a summarized level at the GL level.

    Before doing that, please clarify with your auditors if you need this information in AX at all, because for many countries it is ok to report the profit/loss in your financial statements before distributions to shareholders/investors. If you don't have to include it in AX I won't do it and if you have to do it, try to hide the details by making a summarized posting in GL on the ledger accounts only.

    Using the payroll module and/or AP will allow users to track more details than you want to show.

    Best regards,

    Ludwig

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