Bookkeeping Tip for Entrepreneurs: How to Pay Yourself the Right Way
Bookkeeping Tip for Entrepreneurs: How to Pay Yourself the Right Way
Posted July 4th – Because nothing says financial independence like knowing how to pay yourself properly!
If you’re running a business as a sole proprietor or a single-member LLC, you’ve likely asked:
“How do I pay myself?”
Is it a paycheck? A transfer? Is it taxable?
Here’s the simple answer: You pay yourself through an Owner’s Draw.
But what exactly is that?
What Is an Owner’s Draw?
An owner’s draw is when you withdraw money from your business for personal use. Since the business and owner are legally the same under sole proprietorship or single-member LLC, it’s not considered a salary—but a distribution of your profits.
It’s not taxed when you draw it. Instead, your net business income (after expenses) is taxed on your personal tax return—regardless of how much you actually pull out.
Best Practices for Owner’s Draws
To avoid headaches and stay compliant, follow these bookkeeping tips:
Open separate business and personal bank accounts. Never mix funds.
Transfer money from business to personal as a draw—label it clearly in QuickBooks or your accounting system.
Track draws consistently. Set a routine (weekly, biweekly, monthly) just like a paycheck.
Know your numbers. Don’t overdraw your business—leave enough for taxes and operating costs.
This July 4th, celebrate not just independence, but financial independence by getting your business processes in order!
📅 Want help setting this up in QuickBooks? Schedule a free call with Dr. Bryan Raya, QuickBooks ProAdvisor:
https://calendly.com/dbr_bookkeeping/30-minute-zoom-consultation-call
Or join the DBR Bookkeeping Online Community to connect with other entrepreneurs mastering their finances:
https://www.skool.com/dbr-bookkeeping-8561/about
Let’s start Doing Business Right!
FAQ
Q: Do I need to pay self-employment tax on an owner’s draw?
A: Yes—your business’s net income is subject to self-employment tax, even if you don’t draw all of it.
Q: Can I write off my owner’s draw as a business expense?
A: No—draws are not deductible. Only legitimate business expenses reduce taxable income.
#FourthOfJulyBusinessTips #BookkeepingTips #PayYourselfRight #OwnersDrawExplained #SmallBusinessFinance #LLCPayments #SoleProprietorHelp #DBRBookkeeping #DoingBusinessRight #QuickBooksHelp #EntrepreneurMoneyTips