How to Pay Yourself from a Small Business

How to Pay Yourself from a Small Business

The complete guide to getting paid as an owner—legally, confidently, and consistently

Why Paying Yourself Matters

Too many small business owners treat their income like leftovers.
They pay bills, cover costs, and maybe transfer a little money if there’s something left at the end of the month.

But here’s the truth:
Your paycheck isn’t optional.

It’s one of the most important systems in your business—and when you set it up right, everything else becomes more stable and strategic.

In this guide, you’ll learn:

  • The different ways to pay yourself (based on your business type)

  • How to set up a pay schedule that works

  • How much to pay yourself

  • What tools and accounts to use

  • How to stay tax-compliant and stress-free

Step 1: Know Your Business Structure

How you pay yourself depends on how your business is legally formed.

If you’re a sole proprietor or single-member LLC

You don’t get a W-2 paycheck. Instead, you take an owner’s draw—transferring money from your business account to your personal account.

This is flexible, but it requires you to track your income and set aside taxes yourself.

If you’re an S Corporation owner

You’re required to pay yourself a reasonable salary through payroll. You may also take owner distributions from your remaining profit.

This setup comes with more complexity, but potentially greater tax savings.

Pro tip: Work with a CPA to determine when it makes sense to switch to an S Corp based on your income and business growth plans.

→ Read: Owner’s Draw vs Salary — What’s Best for Your Business Structure?

Step 2: Set a Pay Schedule

Choose a rhythm that works for your cash flow and personal needs:

  • Every 2 weeks (biweekly)

  • 1st and 15th (semi-monthly)

  • Monthly on a set date

Consistency matters more than frequency. When you pay yourself regularly, you:

  • Smooth out income for personal budgeting

  • Avoid emotional or impulsive withdrawals

  • Build financial predictability into your business

Step 3: Decide How Much to Pay Yourself

The right number depends on three things:

  1. Your business revenue

  2. Your fixed expenses and taxes

  3. Your personal financial needs

Start with your personal salary target.
What do you need to earn each month to fund your life—rent, bills, food, savings, and peace of mind?

Then, reverse-engineer your business model around that number.
Inside The Small Business Planner, we show you how to do this with real templates and calculators—so you’re never guessing again.

→ Read: How Much Should You Pay Yourself? A Guide Based on Revenue

Step 4: Use the Right Bank Accounts

Set up your Four Bank Account System to make paying yourself smooth and sustainable:

  1. Income Account – All revenue lands here first

  2. Business Expenses Account – Bills, subscriptions, contractors

  3. Owner Pay Account – Your consistent paycheck, and peace of mind when running payroll of paying out contractors 

  4. Tax Account – Set aside 15–30% of income as it comes in

Optional: Add a 5th account for inventory planning, customer deposits, or profit reserves.

These accounts create separation, reduce emotional spending, and allow you to manage your money without spreadsheets.

→ Read: The 4 Essential Business Accounts Every Owner Needs

Step 5: Track & Withhold Taxes

If you're taking owner’s draws, you're responsible for setting aside and paying your own income taxes.

If you're on payroll through an S Corp, your taxes are withheld automatically—but you'll likely still owe on distributions or other profits.

To stay compliant:

  • Calculate and pay quarterly estimated taxes

  • Work with a tax professional as your income grows

  • Keep a percentage of each payment in your Tax Account

→ Read: Why Most Business Owners Miss Their Tax Goals (and How to Fix It)

Final Takeaway: Pay Yourself Like a Pro

You didn’t start a business to work for free.
You started it to build freedom—and that starts with getting paid.

Paying yourself isn’t about wishful thinking. It’s a system.
And when you follow it, your business supports your life… not the other way around.

Want Help Setting This Up?

The Small Business Planner includes everything you need to start paying yourself like a pro:

  • Step-by-step guides to structure your bank accounts

  • Templates to calculate your monthly Owner Pay

  • Tools to map your pricing, taxes, and expenses

  • A monthly money routine to stay consistent all year

Explore The Planner Now →

Explore the Full Salary Planning Series

This post is the hub of our "Pay Yourself" series. Keep learning with:


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