How to Pay Yourself the Right Way as a Small Business Owner

You started your business for freedom, flexibility, and profit—but when it comes time to actually pay yourself, things get confusing fast.

Whether you're a sole proprietor, single-member LLC, or just launched your creative or coaching business, knowing how to pay yourself the right way is key to staying compliant and stress-free come tax season.

In this guide, we break down the best practices for handling your small business owner income—so you can make confident financial decisions and avoid costly mistakes.

💼 How Do I Pay Myself as a Sole Proprietor or LLC?

✅ Step 1: Set up a separate business bank account
This is non-negotiable. Mixing personal and business funds causes confusion, tax headaches, and audit risk. Open a separate account as soon as possible.

✅ Step 2: Understand Your Entity Type

• Sole Proprietor or Single-Member LLC (default): You don’t get a W-2. Instead, you take what’s called an owner’s draw—transferring profits from the business account to your personal account.

• Multi-Member LLC: Payments are divided among partners based on the operating agreement.

• LLC taxed as an S-Corp: You must pay yourself a reasonable salary through payroll and you can take additional distributions.

✅ Step 3: Track Your Draws and Stay on Budget
Paying yourself “whatever’s left” isn’t sustainable. Use your financial reports to determine a consistent monthly amount based on profits and cash flow.

✅ Step 4: Set Aside Taxes
As a sole proprietor or LLC, no one’s withholding taxes for you. Set aside 25–30% of your profit for federal and state taxes—or risk a surprise tax bill.

❓ FAQ: Paying Yourself as a Business Owner

Q: How much should I pay myself from my LLC?
A: Start with 30–50% of your net profit depending on your expenses, growth plans, and taxes. Use a bookkeeping system like QuickBooks to guide your decisions.

Q: Do I have to put myself on payroll?
A: Not unless your LLC is taxed as an S-Corp. If you’re a sole proprietor or single-member LLC, you take owner’s draws—not payroll.

Q: What if I accidentally used my business card for personal expenses?
A: It happens—but you should reimburse your business and track it properly. Keeping clean books is essential for avoiding IRS red flags.

💡 “Paying yourself the right way is how you protect your business and your peace of mind.”
Dr. Bryan Raya has helped dozens of creatives, coaches, and solo entrepreneurs build a smarter system for paying themselves—and save over $200,000 in taxes in 2025 alone.

📞 Book a free call with Dr. Raya to make sure you’re paying yourself correctly—and Doing Business Right.

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