Paying Yourself via Owner’s Distribution

How should I pay myself?

We get this question on a weekly basis from new or potential clients.

Especially for Single Member LLCs or sole proprietors, this question comes up often.

They think, “I’m not on payroll and I’m worried about taking money out incorrectly.”

They are right to tread carefully. If you start paying personal expenses from your business accounts, you could pierce the veil of protection of your LLC. (We’re not lawyers, but we can some really good ones to help if you need it)

The best way to pay yourself is by taking an Owner’s Distribution from your business bank, either in the form of a check – from the business to you – or a withdrawal from your business and into your personal account.

Then, in your accounting software, make sure to categorize it as an Owner’s Distribution.

Pro tip – Make sure you have this set up as an equity account – it should not be a business expense in your Profit & Loss!