Nobody sits you down and explains how to pay yourself when you work for yourself. So people wing it — and the right answer turns out to depend entirely on how your business is structured.
Sole proprietor / single-member LLC: the owner’s draw
You take an owner’s draw — just move money from the business to your personal account. It’s not a paycheck and it’s not a deduction. Here’s the part that surprises people: you’re taxed on your business’s profit, not on what you draw. Take out every dollar or leave it all in — your tax bill is the same either way.
Partnership / multi-member LLC: draws + guaranteed payments
Similar draws, plus a special animal called a guaranteed payment — a fixed amount paid to a partner for work regardless of profit, the closest thing a partnership has to a salary. It’s how you pay one partner more for doing more, cleanly and on the record.
S corp: salary and distributions — in that order
This is the one with rules. You must run an actual payroll and pay yourself a reasonable salary first; then you can take additional profit as distributions that skip self-employment tax. The salary-then-distribution order is the whole point of the structure — and skipping the salary is the classic mistake.
C corp: salary + dividends
Salary is deductible to the company; dividends are paid from after-tax profit and taxed again on your return — the “double taxation” you’ve heard about. Different game, usually for businesses raising outside money.
Getting paid the right way is one of the four parts of the tax job that actually interlock — and it’s the part almost nobody explains. Our Playbook has a full module on it: draw versus salary versus distribution, by structure, with the account setup that keeps you clean.
The Business Owner’s Tax Playbook
Six tools that run your entire tax year — deductions in depth, the structure decision, how to pay yourself, and a quarterly-tax autopilot that makes penalties mathematically impossible.
