How to Pay Yourself as a Business Owner: A Guide by Business Structure

One of the most common questions new business owners ask is, “How do I pay myself?”

The answer depends on your business structure. Whether you operate as a sole proprietorship, partnership, LLC, S corporation, or C corporation determines whether you’ll pay yourself through owner draws, guaranteed payments, payroll, or dividends.

Understanding the rules can help you stay compliant, avoid tax surprises, and choose the compensation strategy that’s right for your business.

Pass-Through Entities

Several business structures, including Sole Proprietorships, Partnerships, Limited Liability Companies (LLCs), and S Corporations are considered pass-through entities, meaning their profits and losses pass through to the business owners’ individual tax returns rather than the company’s.

Pass-through business structures include:

• Sole Proprietorships
• General Partnerships
• Limited Partnerships
• Limited Liability Partnerships
• Limited Liability Companies (LLCs) (unless an LLC elects to be taxed as a
• corporation)
• S Cor...