Salary vs. owner’s draw:

How to pay yourself as a business owner

Some business owners pay themselves a salary, while others compensate themselves with an owner’s draw. But how do you know which one (or both) is an option for your business? Follow these steps.

Before you can decide which method is best for you, you need to understand the basics. Here’s a high-level look at the difference between a salary and an owner’s draw (or simply, a draw):

Step #1: Understand the difference between salary vs. draw

– Owner’s draw: The business owner takes funds out of the business for personal use. Draws can happen at regular intervals, or when needed.

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– Salary: The business owner determines a set wage or amount of money for themselves, and then cuts a paycheck for themselves every pay period.

There are a lot of factors that will influence your choice between a salary, draw, or another payment method (like dividends), but your business classification is the biggest one.

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Step #2: Understand how business classification impacts your decision

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