Understanding Owner's Draw vs. Salary
How an owner takes money out of the business isn't just a personal finance question — it changes how the transaction should be recorded and can affect tax treatment significantly.
Owner's draw
A draw is money taken from business profits, typically used by sole proprietors and partners. It's not a deductible business expense and isn't run through payroll.
Salary
A salary is a set wage, typically used by owners of S-corps or C-corps, run through payroll with taxes withheld — and it is a deductible business expense.
Which one applies depends on your business structure, and getting it recorded correctly in your books matters just as much as which one you choose — this is a good conversation to have with both your bookkeeper and your CPA.
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