Owner Track worksheet
How to Pay Yourself as a Business Owner: Owner's Draw, Salary or Distribution
The formula
Taxable owner income (pass-through) = Allocated business income (Schedule C net profit or Schedule K-1 share), generally taxable independently of cash withdrawals; guaranteed payments and taxable distributions can also affect owner income.
S corporation: Reasonable W-2 compensation (payroll-tax subject) + Remaining distributable profit (not self-employment-tax subject, subject to basis).
Illustrative example
Examples use made-up numbers. Education only, not tax, legal or investment advice.
| Entity/Role | How Owner Is Paid | Payroll Tax Applies? | Taxable Amount Basis |
|---|---|---|---|
| Sole proprietor | Owner's draw | No (self-employment tax applies instead) | Schedule C net profit |
| Partner / multi-member LLC (partnership) | Draw or guaranteed payment | No (self-employment tax generally applies instead; rules differ for limited partners) | Distributive share on Schedule K-1 |
| S corporation shareholder-employee | W-2 wage + distribution | Yes, on wage portion only | Reasonable compensation + separate K-1 share |
| C corporation shareholder-employee | W-2 wage; dividends separately | Yes, on wage portion only | Wage amount; dividends taxed separately |
Your numbers
| Entity/Role | How Owner Is Paid | Payroll Tax Applies? | Taxable Amount Basis |
|---|---|---|---|
Estimates depend on your inputs.