I pay myself from the business account. How should that be categorized?

Asked by Ryland B.

I pay myself from the business account. How should that be categorized?

Answer

By Ryland Beard, founder of Switchbooks · October 6, 2026

It depends on how your business is taxed.

If you are a sole proprietor or a single-member LLC taxed as one, paying yourself is an owner's draw. That is equity, not an expense, so it does not reduce your profit.

If you are an S corp, your paycheck runs through payroll and is wages. Anything you take above that is a distribution, which is equity again.

Tell Elliott which you are and he handles it. If you are not sure, that is a question for your tax preparer, and it is worth asking this year rather than next.

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