Let’s Talk About Owner’s Pay-the Right Way
Here’s a question I ask clients all the time:
Are you paying yourself, or are you just transferring money to survive?
Cue the awkward silence.
Listen…no one starts a business because they’re obsessed with payroll structures or owner’s equity. But if you’re constantly moving money around without a plan, you’re not paying yourself… you’re just dodging the truth.
And that truth?
Your business should be able to support you, not just survive you.
So What Is the Right Way to Pay Yourself?
It depends on two things:
???? Your business structure
???? Your business profitability
Here’s a quick breakdown:
???????? If you’re a sole proprietor, single-member LLC, or partnership:
You’re not technically on payroll. You pay yourself through an owner’s draws, which is basically taking money out of the business bank account and transferring it to your personal one. No W-2. No taxes withheld. But here’s the kicker: you still owe self-employment tax on that income. And if you’re not tracking it right? Yeah, it gets messy – FAST.
???? If you’re an S-Corp (or taxed like one):
You’re legally required to pay yourself a “reasonable salary” through payroll. That means W-2 wages, payroll taxes, and probably a payroll provider. You can take additional profit distributions, but you can’t skip the payroll part and call everything a draw. (That’s how people end up in IRS drama.)
???? If you’re not profitable yet:
You’re not failing, but you do need a plan. Maybe you reinvest everything for a few months, or take small, consistent draws to support your life without draining the business dry. But don’t just wing it. Set an intentional amount and stick to it.
Here’s the Red Flag No One Talks About:
If you’re constantly wondering, “Can I afford to pay myself this week?” that’s a cash flow issue, not just a pay issue.
Your compensation should be part of the budget, not an afterthought.
Because if your business only works when you work for free… it’s not sustainable. And you didn’t build all this just to keep struggling.
Bottom Line:
✅ Paying yourself isn’t selfish, it’s responsible.
✅ It should be intentional, consistent, and legal (please don’t “just Venmo yourself”).
✅ And it should evolve as your business grows.
Whether you’re using payroll, taking distributions, or trying to figure out what the hell any of this means, now’s the time to get clear.
Want help setting up a real pay structure that actually works?
Let’s talk…because you deserve to run a business that pays you like the boss you are. Click the contact us tab and fill out the form. We’d love to chat with you!
