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You are asking multiple questions. As to earned money that money is a term of art but I believe you mean income after expenses. As a sole proprietor all of your sales and expenses resulting in income will be on Schedule C if you are a US citizen. You will pay a self employment tax and income tax on those monies to the IRS and your State if your State has an income tax. The rest of the moeny is your personal money after taxes. Regarding your second question. When you operate your sole proprietorship you typically have a business bank account. The sales from the business should go in that account. The employees will be paid from your business account. You are required to pay payroll taxes to the respective entity. In California the Employment Development department which handles unemployment receives a percentage of the employees salary directly from the employer. Social Security is paid via the IRS. Typically State disability is paid depending upon your State. Your employee will receive a paycheck showing the deductions for all these items. Depending upon the income you may be required to remit payroll taxes quarterly or even per pay period. You would be smart to use a service company such as ADP (the largeest payroll processing company in the US). In the even payroll taxes are inaccurate or not paid you will be personally liable.