In this episode, Katelyn answers one of the most common (and most misunderstood) questions from entrepreneurs: how do you actually pay yourself?

She breaks down the differences between paying yourself as a sole proprietor, single-member LLC, partnership, and S-Corp. You’ll learn why owners draws are not payroll, why how you move the money doesn’t change your tax liability, and how to set up a consistent system that keeps your cash flow predictable.

The episode also covers when payroll is required, how S-Corp elections change the process, and why semi-monthly payroll may be more practical than biweekly. If you’ve ever worried you’re “doing it wrong” or avoided paying yourself because of tax confusion, this episode brings clarity and simplicity to the process.

Key Takeaways

Owner’s draws are not payroll and do not count as business expenses.
You pay taxes on profit whether you transfer the money to yourself or leave it in the business.
Setting a consistent weekly or biweekly pay schedule reduces chaos.
Sole proprietors and single-member LLCs have flexibility in how they pay themselves.
S-Corps must run payroll to maximize tax benefits.
Profit distributions and bonuses are handled differently than payroll wages.

Check out Gusto to simplify your payroll: https://thefreelancecfo.biz/gusto

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DISCLAIMER: This Podcast may receive compensation for promoting or recommending products or services through affiliate links. We only recommend products and services that we believe are of value to our listeners. The content provided in this podcast is for informational purposes only and does not constitute professional financial, accounting, or legal advice. Listeners are advised to consult with qualified professionals before making any financial decisions. The Freelance CFO is not responsible for any actions taken based on the information provided.

Music credit: Neon Fairies by Wolves

The Most Tax-Efficient Way to Pay Yourself