How do owner draws and distributions work?
Short Answer: Owner draws are common for sole proprietors/LLCs; distributions are common for S-Corps (after salary).
Owner draws are transfers from business to personal and are not payroll. S-Corp distributions are profit payouts to owners and generally happen after the owner receives a reasonable salary.
Common mistakes:
• Treating draws as deductible payroll
• Taking distributions without salary
• Not planning for taxes on profit
What we recommend: Align your pay method with your entity type and keep your records clean.
Still have questions?
If you’re not sure what applies to your situation, we can help.