Corporate Equity Draw vs Income
You tagged with S-Corp, so I assume that you have that tax status.  Under that situation, you don't get taxed on distributions regardless of what you call them.  You get taxed on the portion of the net income that is attributable to you through the Schedule K that the S-Corp should distribute to you when the S-Corp files its tax return.  You get taxed on that income whether or not it's distributed. If you also work for the small business, then you need to pay yourself a reasonable wage.  The amount that you distribute can be one factor in determining reasonableness.  That doesn't seem to be what you asked, but it is something to consider.
In reality, it's much more abstract than this feeble article depicts, which is why right/left winger Reddit-heroes often hop on this sub to validate their political views on the subject for themselves. Its economic ignorance to not think that how a governments taxes, and changes to those policies, affect how people &amp; businesses behave. I don't have the answer to all the economic problems but I'm not fooled by OP's nonsense propaganda piece.  My issue is with the article's false claim.   &gt;the job creation records of the 92 publicly held U.S. corporations that reported a U.S. profit every year from 2008 through 2015 and paid less than 20 percent of these earnings in federal income tax.  This study looked at 2%(the 92 profitable) of 4,333 publicly traded US companies selected based on both having turned a profit seven years running &amp; having dodged corporate taxes to make their tax payout close to 20%.   Does this sample sound like the entire US 27,900,000 total companies that comprise the domestic US economy? (That's .02% rounding up-yes the decimal is in the right spot.)  Even if this wasn't a flawed study from the start on selection bias, this isn't even quasi-experimental because there isn't a control group. Even a null conclusion would be invalidated without call for further inspection.   The source is a left-wing think tank drawing a line from the false conclusion to a motivated source. Is this the standard of information anyone should make policy based on?   This article says nothing definitive with evidence &amp; is worthless. First, corporate profits can grow relative to GDP.  If companies succeed in growing revenue without paying much more to workers, then corporate profits and stock prices will grow relative to GDP.  That has been happening for the last couple decades.  If you require that we keep corporate profits vs GDP constant, then borrowing/leverage is how you do it.  Companies can expand their operations on a fixed amount of shareholder equity, and as long as they can grow their profits faster than the cost of the debt, then shareholders keep the upside.  But this also means that share prices will quickly fall if profits decline even a small amount, because the debt must still be paid off. "TL;DR: Get a tax adviser (EA/CPA licensed in your State) for tax issues, and a lawyer for the Operating Agreement, labor law and contract related issues. Some things are not suitable for DIY unless you know exactly what you're doing. We both do freelance work currently just through our personal names.   What kind of taxes are we looking into paying into the business   (besides setup of everything) compared to being a self proprietor?   (I'm seeing that the general answer is no, as long as income is <200k,   but not certain). Unless you decide to have your LLC taxed as a corporation, there's no change in taxes. LLC, by default, is a pass-through entity and all income will flow to your respective tax returns. From tax perspective, the LLC will be treated as a partnership. It will file form 1065 to report its income, and allocate the income to the members/partners on schedules K-1 which will be given to you. You'll use the numbers on the K-1 to transfer income allocated to you to your tax returns and pay taxes on that. Being out of state, will she incur more taxes from the money being now   filtered through the business? Your employee couldn't care less about your tax problems. She will continue receiving the same salary whether you are a sole proprietor or a LLC, or Corporatoin. What kind of forms are we looking into needing/providing when   switching to a LLC from freelance work? Normally we just get 1099's,   what would that be now? Your contract counterparts couldn't care less about your tax problems. Unless you are a corporation, people who pay you more than $600 a year must file a 1099. Since you'll be a partnership, you'll need to provide the partnership EIN instead of your own SSN, but that's the only difference. Are LLC's required to pay taxes 4 times per year? We would definitely   get an accountant for things, but being as this is side work, there   will be times where we choose to not take on clients, which could   cause multiple months of no income. Obviously we would save for when   we need to pay taxes, but is there a magic number that says ""you must   now pay four times per year"". Unless you choose to tax your LLC as a corporation, LLC will pay no taxes. You will need to make sure you have enough withholding to cover for the additional income, or pay the quarterly estimates. The magic number is $1000. If your withholding+estimates is $1000 less than what your tax liability is, you'll be penalized, unless the total withholding+estimates is more than 100% of your prior year tax liability (or 110%, depending on the amounts). The LLC would be 50% 50%, but that work would not always be that. We   will be taking on smaller project through the company, so there will   be times where one of us could potentially be making more money. Are   we setting ourselves up for disaster if one is payed more than the   other while still having equal ownership? Partnerships can be very flexible, and equity split doesn't have to be the same as income, loss or assets split. But, you'll need to have a lawyer draft your operational agreement which will define all these splits and who gets how much in what case. Make sure to cover as much as possible in that agreement in order to avoid problems later." There are all sorts of topics in finance that take a lot of time to learn.  You have valuation (time value of money, capital asset pricing model, dividend discount model, etc.), financial statement analysis (ratio analysis, free cash flow &amp; discounted cash flow, etc.) , capital structure analysis(Modgliani &amp; Miller theories of capital structure, weighted average cost of capital, more CAPM, the likes), and portfolio management (asset allocation, security selection, integrates financial statement analysis + other fields like derivatives, fixed income, forex, and commodity markets) and all sorts.   My opinion of Investopedia is that there is a lot of wheat with the chaff.  I think articles/entries are just user-submitted and there are good gems in Investopedia but a lot of it only covers very basic concepts.  And you often don't know what you don't know, so you might come out with a weak understanding of something.    To begin, you need to understand TVM and why it works.  Time value of money is a critical concept of finance that I feel many people don't truly grasp and just understand you need some 'rate' to use for this formula.  Also, as a prereq, you should understand basics of accrual accounting (debits &amp; credits) and how the accounting system works.  Don't need to know things like asset retirement obligations, or anything fancy, just how accounting works and how things affect certain financial statements.  After that, I'd jump into CAPM and cost of capital.  Cost of capital is also a very misunderstood concept since schools often just give students the 'cost of capital' for math problems when in reality, it's not just an explicit number but more of a 'general feeling' in the environment.  Calculating cost of capital is actually often very tricky (market risk premium) and subjective, sometimes it's not (LIBOR based).    After that, you can build up on those basic concepts and start to do things like dividend discount models (basic theory underlying asset pricing models) and capital asset pricing models, which builds on the idea of cost of capital.    Then go into valuation.  Learn how to price equities, bonds, derivatives, etc.  For example, you have the dividend discount model with typical equities and perpetuities.  Fixed income has things like duration &amp; convexity to measure risk and analyze yield curves.  Derivatives, you have the Black-Scholes model and other 'derivatives' (heh) of that formula for calculating prices of options, futures, CDOs, etc.  Valuation is essentially taking the idea of TVM to the next logical step.  Then you can start delving into financial modelling.  Free cash flows, discounted cash flows, ratio analysis, pro forma projections.  Start small, use a structured problem that gives you some inputs and just do calculations.  Bonuses* would be ideas of capital structure (really not necessary for entry level positions) like the M&amp;M theorems on capital structure (debt vs equity), portfolio management (risk management, asset allocation, hedging, investment strategies like straddles, inverse floaters, etc), and knowledge of financial institutions and banking regulations (Basel accords, depository regulations, the Fed, etc.).    Once you gain an understanding of how this works, pick something out there and do a report on it.  Then you'll be left with a single 'word problem' that gives you nothing except a problem and tells you to find an answer.  You'll have to find all the inputs and give reasons why these inputs are sound and reasonable inputs for this analysis.    A big part that people don't understand about projections and analysis is that **inputs don't exist in plain sight**.  You have to make a lot of judgment calls when making these assumptions and it takes a lot of technical understanding to make a reasonable assumption--of which the results of your report highly depend on.  As a finance student, you get a taste for all of this.  I'm gonna say it's going to be hard to learn a lot of substantial info in 2 months, but I'm not exactly sure what big business expects out of their grunts.  You'll mostly be doing practical work like desk jockey business, data entry, and other labor-based jobs.  If you know what you're talking about, you can probably work up to something more specialized like underwriting or risk management or something else.   Source:  Finance degree but currently working towards starting a (finance related) company to draw on my programming background as well. cash isn't part of changes in working capital calculation - dont include it in current assets.   *edit - Also to answer a question you didn't ask, subtracting cash doesn't skew the multiples.  If cash really is that excess, the market cap will reflect a large cash position, thus adding it all back into EV.  Think of apple as a good example.  If they theoretically would dividend out all the cash, market cap would drop and so would EV. Yep, but it you didn't answer my question (edit: I know it was phrased as a question, but I do know youre supposed to model changes in cash). When bankers calculate all three approaches, how do they compare them? From what I see, the conclusion of each approach gives us:  * Public Company Approach: Enterprise Value * Transaction Approach: Enterprise Value * Discounted Cash Flow Approach: Enterprise Value + Minimum Level of Operating Cash  Does an investment banker subtract out that minimum level of operating cash at the end of the calculation to get to a value that he can then compare? Don't ever quantify a stock's preference/performance just based on the dividend it is paying out Volatility defined by movements in the the stock's price, affected by factors embedded in the stock e.g. the corporation, the business it is in, the economy, the management etc etc. Apple wasn't paying dividends but people were still buying into it. Same with Amazon, Berkshire, Google. These companies create value by investing their earnings back into their company and this is reflected in their share prices. Their earnings create more value in this way for the stockholders. The holding structures of these companies also help them in their motives. Supposedly $100 invested in either stocks. For keeping things easy, you invested at the same time in both, single annual dividend and prices more or less remain constant. Company A: $5/share at 20% annual dividend yield.  Dividend = $20 Company B: $10/share at 20% annual dividend yield  Dividend = $20 You receive the same dividend in both cases. Volatility willn't affect you unless you are trading, or the stock market tanks, or some very bad news comes out of either company or on the economy. Volatility in the long term averages out, except in specific outlier cases e.g. Lehman bankruptcy and the financial crash which are rare but do happen. In general case the %price movements in both stocks would more or less follow the markets (not exactly though) except when relevant news for either corporations come out. "Accounts track value: at any given time, a given account will have a given value. The type of account indicates what the value represents. Roughly: On a balance sheet (a listing of accounts and their values at a given point in time), there is typically only one equity account, representing net worth, I don't know much about GNUCash, though. Income and expenses accounts do not go on the balance sheet, but to find out more, either someone else or the GNUCash manual will have to describe how they work in detail. Equity is more similar to a liability than to assets. The equation Assets = Equity + Liabilities should always hold; you can think of assets as being ""what my stuff is worth"" and equity and liabilities together as being ""who owns it."" The part other people own is liability, and the part you own is equity. See balance sheet, accounting equation, and double-entry bookkeeping for more information. (A corporate balance sheet might actually have more than one equity entry. The purpose of the breakdown is to show how much of their net worth came from investors and how much was earned. That's only relevant if you're trying to assess how a company has performed to date; it's not important for a family's finances.)"