A sole proprietor gets income, but can he/she call a check written to himself/herself a business expense? How does the sole proprietor not pay taxes twice on the same money which was business income and now is personal income? In short, what is the accounting rationale behind a business owner writing a salary check to himself/herself?

and the books should be kept separate from your personal financial affairs. A business can't very well make the house payment, pay for the family vacation, etc. - the money must first be paid to the Owner of that business, with appropriate payroll deductions, just as it is to any other employee of the company. In the case of a sole proprietorship, payroll deductions are often not withheld; quarterly taxes, more typically, are filed with and paid to the appropriate authorities (and must be planned for!). Schedule C and Schedule SE (self-employment tax...sort of like social security tax), and any other appropriate forms such as use of your home for the business, are filed with personal income tax returns.

The income is generally not "double taxed" unless it is dividend income (large corporations and their stockholders face the same thing). A salary paid to the owner is a deduction for the business.

There are three ways to answer your question, depending on what kind of business you have:

Sole proprietorship The owner of the business is doing business with a license in his name alone. The person and the business are the same entity for tax purposes, meaning the profits are their income. The owner should avoid setting up a payroll account to pay themselves. When you set up a salary for yourself, you become liable to pay all applicable taxes (FUTA/SUTA/FICA) At the end of the year, when you do your personal income tax, fill out schedual SE (self-employment tax to pay your share of FICA--there's a tax break on one of the lines for VERY small businesses) and schedual C (profits from a business). If you run your business out of your home, be sure to look into what household expenses become qualified deductions. (You're allowed to take a draw on your company's income whenever you want. On the books you just record a debit to your capital account and credit to cash--it doesn't affect the income statement.) Make sure your company actually has the money available! You can't squeeze blood out of a turnip!

Partnership The only real difference between a sole proprietorship and a partnership is that there is a partnership agreement in place telling what share of the profits is due each partner. At the end of the year (or whatever period agreed to), the profits are transferred from the revenue accounts into each partner's capital account. When any partner takes a draw, it's handled the same way as a sole proprietorship, the draw simply comes out of whatever is available in their own personal capital account. Again, when the money ain't there, you can't draw any more.

Corporation This can be a "sole corporation" to accomodate a single owner or a "closed corporation" for multiple owners. "Sole" means only one person owns the stock, and "closed" means that the stock is not available for sale to the public, which basically means there's a partnership arrangement in the articles as to which partner owns how many shares. The corporation is the only one of the three that must have salary accounts opened for the owners, and because of this, all applicable taxes must be payed as if the owners are employees. The reason for this is because in a corporation, the business and the owners ARE seperate entities. (If an owner doesn't want a salary, they'll simply get income at the end of the year when dividends are paid on the stock they own.) In this case, at the end of the year when the income statement is closed out, the net profit (or loss) is moved into a "retained earnings" account, and when the dividends are paid, shares owned determines how much everyone gets (whether they have a salary or not). "Retained earnings" takes the place of the partners' capital accounts. Employees, whether they are owners or not, get a W-2 at the end of the year, and their profits from the business come from their 1099D issued for their stock dividends.

(I went into a little detail here because any small sole-proprietorship can file articles of incorporation if they prefer the advantages of a corporation. You get hit for few more taxes, and you'll get the dreaded double tax when your business is taxed on income and when you're taxed on the business's income from your shares. But there are ways to reduce both of these before the Tax Man cometh! )

One part of your question I didn't answer is whether the owner's salary is a legitamate expense. For sole proprietors and partners, no, they don't get salaries, they get draws, which are not taxed. You get taxed on the profits whether you draw them out or not. For a corporation, you get a salary and yes, it is an expense.