How to Correctly Pay Yourself and Take Cash from Your Business 💰
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• Cash is withdrawn through partner draws or distributions, per the partnership agreement.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).

Video Script
Wondering how to pay yourself the right way from your business? Let’s break it down. If you’re a sole proprietor or single-member LLC, you don’t take payroll, you take owner’s draws. Partnerships? Partners can’t be on W-2, but you’ll receive guaranteed payments and profit distributions. S Corporations are different—you must pay yourself a reasonable salary through payroll, and then you can take additional profits tax-free. And for C Corporations, the business pays a flat 21% tax, and you can take money out as W-2 wages or dividends, though dividends get taxed twice. The right approach depends on your structure and goals. Paying yourself correctly keeps you compliant, and can save you money. This has been a tax saving tip from Accounting Solutions. Book a time to learn more.

Disclaimer: This content is provided for educational purposes only and is not legal, tax, accounting, or financial advice. Every situation is unique, so consult your own attorney, CPA, or financial advisor before making decisions based on this information.