How to Pay Yourself as a Business Owner (Without Messing Up Your Taxes)

One of the most exciting parts of running your own business is finally getting paid by your business. But how you pay yourself? That part can get confusing real quick.

Should you write yourself a check? Just transfer money when you need it? What about taxes?

If you’ve ever asked “how do I pay myself the right way?” — you’re not alone. Let’s break it down in a way that makes sense and keeps your wallet (and the IRS) happy.

First: Know Your Business Structure

How you pay yourself depends entirely on how your business is set up. Here’s a quick cheat sheet:

Sole Proprietorship / Single-Member LLC

You're the business. You take an "owner’s draw" — basically, you transfer money from the business account to your personal account. No payroll needed, but you do have to account for self-employment taxes.

Do this:

• Transfer money to yourself consistently (weekly/monthly)

• Set aside 25–30% for taxes

• Track everything (because the IRS is nosey)

Partnership / Multi-Member LLC

You and your business partners split profits based on your agreement. Payments to yourself are still considered “draws,” not wages.

Pro Tip: Partnerships must file a separate return (Form 1065), and each partner gets a Schedule K-1 showing income for their personal return.

S Corporation / Corporation

Now we’re getting fancy. If you’ve elected S Corp status, the IRS requires you to pay yourself a reasonable salary through payroll (yes, with actual paystubs and tax withholdings). You can also take additional distributions after your salary.

Translation:

• You’re both the employee AND the owner

• You need payroll software or a professional to help

• This method can save you on self-employment taxes (cha-ching 💸)

So… What Counts as “Reasonable” Salary?

If you're an S Corp owner, the IRS says you must pay yourself a fair wage for the work you do. No paying yourself $10/month and calling it a day.

Look at what people in similar roles earn, consider your experience, and keep documentation. (In case Uncle Sam ever comes knocking.)

What About Taxes?

No matter your structure, you have to plan for taxes. Here’s how:

Sole Prop / LLC: Pay estimated quarterly taxes (yes, even if you only made $3K this quarter)

S Corps: Your salary is taxed like an employee, and distributions may be taxed differently (or not at all!)

Everyone: Keep a separate business account. Always. Please.

💡 Bonus: 3 Quick Tips to Keep It All Together

Use payroll software (like Gusto or QuickBooks Payroll) if you’re an S Corp — don’t try to DIY this.

Pay yourself consistently, whether it’s weekly, biweekly, or monthly, treat it like a real paycheck.

Work with a professional, because trying to Google your way through this can cost you big time later.

📣 Ready to Pay Yourself Like a Boss?

Book a Business Strategy Session and let’s walk through the exact steps to make sure you’re paying yourself properly — without triggering red flags or missing tax deadlines.

You work too hard not to pay yourself right.