One of the most common questions I get from business owners is:“What’s the right way to pay myself from my business?”

The answer depends on your business structure. Here’s a quick guide:

👤 Sole Proprietors & Single-Member LLCs

No payroll—you take owner’s draws.

Report net earnings on Schedule C of your personal tax return.

Pay self-employment taxes (15.3%) on your net income.

🤝 Partnerships & Multimember LLCs

Partners cannot receive W-2 wages.

Instead, they receive:

Guaranteed payments (taxed as income, subject to SE tax).

Profit distributions (generally subject to SE tax, except passive limited partners).

Cash is withdrawn through partner draws or distributions, per the partnership agreement.

🏢 S Corporations

You must pay yourself a reasonable salary via W-2 wages (subject to FICA taxes).

Additional profits flow through to you personally and can be distributed tax-free.

🏦 C Corporations

Corporation pays a flat 21% tax.

You can receive:

W-2 wages (subject to payroll taxes).

Dividends (taxed twice—corporate and personal).