A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.
Small Business Owners: How to Pay Yourself Legally
Updated on: July 21, 2025
8-minute Read
It’s important to know how to pay yourself as a business owner. Whether you’re a photographer, wedding planner, coach, or other creative, you started a business not just to share your skills, but to earn great money along the way!
But if you’re like many freelancers or self-employed professionals, you might be asking, “How do I correctly pay myself from my business?”
I’m Paige Griffith, head attorney and CEO behind The Legal Paige. I understand that the legal side of a business can feel intimidating. That’s why I share legal education and tools to help you get Legally Legit®—without breaking into hives!
In this blog, I’ll help you out with questions like: “How do I pay myself as a sole proprietor?” and “How do I pay myself as a sole member LLC?”
It’s often as easy as transferring funds from a business bank account to a personal bank account.
BUT…there are a few things to know about how to pay yourself as a business owner. I don’t want you to run into financial or legal trouble!
First, Set Up a Business Bank Account
No matter what kind of business you have, a business checking account is the best place to keep your hard-earned funds.
While certain business organizations (ahem, sole proprietorships) don’t legally require a business bank account, it’s best to keep your personal and business finances separate. If you’re an LLC, this separation is required.
Either way, separating your business and personal funds makes bookkeeping, accounting, and tax filing easier. It also allows you to pay yourself a consistent amount.
How to Set Up a Business Bank Account to Pay Yourself
There are lots of banks and institutions that offer checking accounts specifically for small businesses. Whether you bank with a credit union or a nationwide bank, chances are they have a business bank account for you to use!
To set up a business checking account, you’ll need:
- Your Social Security Number (if you’re a sole proprietor) or
- Your LLC registration number (if you’re an LLC) with your state
- Most banks will also require an EIN (Employer Identification Number)
I’ll get into the differences between a sole proprietorship and an LLC in just a minute. But if you don’t know what an EIN is, check out my YouTube video below.
The process to receive an EIN takes five to ten minutes, and it's free to obtain. Just head to the IRS.gov website and on “Apply for an EIN.” The good news is, you’ll be issued that number automatically, so there is no wait time.
You can use that EIN to create a bank account right away! As you do so, I have a few bonus tips for you to keep in mind.
3 Tips for Using Your Business Bank Account
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When you choose a bank, look for one with opening incentives. Because who doesn’t like some extra income to work with?
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Once you have your account set up, start taking client payments into that account. If you're still accepting payments personally instead of through your LLC, it's time to make a change.
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Diversify your funds across different accounts. It’s a good idea to have a backup account with some money in it, in case your primary account is compromised.
Now that we’ve covered business accounts, let’s answer some basic questions about how to pay yourself as a business owner.
How much should I pay myself as a business owner?
As a creative, entrepreneur, or small business owner, you can—and SHOULD—pay yourself for your work! You worked hard to capture those photos, design those custom graphics, or put together a memorable event!
But, hold up, this isn’t a green light to transfer all of your business revenue into your personal account.
It’s safest to keep some revenue in your business account in case of emergencies or for future investments. We suggest maintaining three months of normal expenses as the “$0” amount in your business checking account. For example, if you have average monthly operating expenses of $5000, you will always want to keep a bare minimum of $15,000 in your business account.
Also, don’t forget to set aside money for taxes. Self-employed people in the U.S. should generally save around 30% of their income for taxes. I get it—that feels tough at first, but it’s something to get used to to stay legally compliant. You can also pay taxes quarterly, which can help ease the burden of a big tax bill at the end of each year. A bookkeeper or accountant can help you estimate taxes each quarter and submit that payment to the IRS. You can find a list of TLP approved bookkeepers HERE!
Each business and individual is different when it comes to how much you should pay yourself. Find a balance that works for you.
*Sidenote: A game-changing book on how to pay yourself as a business owner is Profit First by Mike Michalowicz. (It’s linked for you at the bottom of this page.)
How often should I pay myself from my business?
As a small business owner, you can decide how often you want to pay yourself from your business. Want to get your paycheck weekly, monthly, or bimonthly? Want to pay yourself a quick bonus after a long week? You can do that!
With a sole proprietorship, a consistent pay period isn’t necessary. Regardless of which account the money is in, profits will be taxed the same way. However, consistency still helps your books look legit.
Especially if you’re an LLC, it’s best to pay yourself on a consistent schedule.
For a deeper understanding of how to pay yourself as a business owner, let’s talk about business entities and tax designations.
How to Pay Yourself as a Business Owner: Sole Proprietorships, LLCs, and S Corporations
How you pay yourself as a business owner depends on what type of business entity you have. It also makes a difference in how you pay taxes.
If you want some deeper background on LLCs and S Corps check out this blog post: “How to Choose Your Business Entity: S Corp vs LLC vs Sole Proprietor.” Or watch my YouTube video below!
How to Pay Yourself as a Sole Proprietor
Paying yourself as a sole proprietor is simple. Simply make periodic bank transfers from your business account to your personal account. You could do this through a direct transfer from your business account to your personal account. You can also totally write yourself a check if online transfers aren’t available.
Just make sure you have what we call a “cha-ching! moment” that’s recorded for tax compliance.
The amounts you pay yourself as a business owner don’t need to be the same each time, because your income and hours worked could vary.
As a sole proprietor, your business profits and personal income are treated the same by the IRS.
How to Pay Yourself as an LLC
Wondering, “How do I pay myself as a sole member LLC?” Well, you have a couple of options.
- Pay Yourself via Owner’s Draws
As an LLC owner, you can do what’s called an “owner's draw.” This is how most—maybe 99%—of solopreneurs with a single-member LLC do it.
As long as you are a single-member LLC, you can transfer money online or write a check from your business account to your personal account just like a sole proprietor would. You can make an owner's draw at any time, for any amount. (Booyah!)
However, as mentioned above, it’s good for your books and accounting to pay yourself a consistent amount.
Tax note: An LLC is what’s called a “pass-through” taxation entity. So, profits are passed through to your personal tax return.
- Pay Yourself via Salary
With an LLC, you can also pay yourself a base salary. This route makes sense when there are multiple members in the LLC and/or if your operating agreement says LLC members must be paid a salary.
However, if you take this route, you may want to consider filing as an S-Corporation. More on this below!
For more details on how to legally pay yourself as a single-member LLC, watch my YouTube video below.
How to add LLC owners to payroll.
Yep, LLC owners can be on payroll. If you do run payroll as an LLC owner, you'll need to:
- Fill out a W-2 and an I-9 like any other employee.
- Use a payroll system (like Gusto or QuickBooks Payroll) OR outsource to a bookkeeper or CPA.
- Issue yourself very consistent pay stubs. For example, bi-monthly or monthly.
- Have federal taxes taken out of your paycheck. Some states have a state income tax that would need to be deducted as well.
However, I don’t typically recommend getting into payroll unless you’re paying yourself as an S Corp.
How to Pay Yourself as an S-Corp
“What the heck is an S Corp?” you ask. I answer that question for you here: What to Know About Saving Money by Filing Taxes as a S Corp.
If you like being paid a fixed salary and meet certain requirements, it might make sense for you to become an S Corporation.
Keep in mind that an S-Corporation is NOT technically a type of business formation or entity; it’s a tax designation. You can elect S Corp status after forming an LLC. The reason business owners pay themselves as S Corps is to pay less in federal taxes.
To pay yourself as an S-Corporation, you’ll need to:
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Form your business as a Limited Liability Company for legal purposes.
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Pay someone to run payroll, or use a payroll service.
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Fill out a W-2 and an I-9 like any other employee.
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List yourself as the owner on the payroll.
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Determine a "reasonable salary" to pay yourself. (More on this here.)
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File two types of tax returns (one for your S Corp and one for your personal taxes).
To pay yourself as an S Corp, you can pay yourself a reasonable salary, then take payments categorized as owner’s distributions.
This can have a nice tax benefit because you ONLY pay Social Security and Medicare taxes on your “reasonable salary.”
Many S Corps end up saving a substantial amount of money each year by avoiding the 15-ish percent of self-employment taxes on owners’ distributions.
If you’d like some more help deciding which business structure is right for you, our FREE business structure guide walks you through the three structures mentioned here.
The Legal Paige Take: How to Pay Yourself as a Business Owner
You have options when it comes to how to pay yourself as a business owner. Here’s a quick recap:
- It’s often as simple as transferring revenue from a business checking account to your personal account. (But remember to keep business and personal funds separate.)
- As a sole proprietor or single-member LLC, you can decide how much to pay yourself and how often. However, consistency is helpful for accounting and tax purposes.
- If you want to be paid a salary or via payroll, you might look into becoming an S Corp for tax benefits.
Helpful References:
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Profit First by Mike Michalowicz
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Gusto online payroll system.
THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.
