Owner's draw vs payroll salary: paying yourself as an owner with Hector Garcia |

Learn more about owner’s draw vs payroll salary and how to pay yourself as a small business owner:

In this QuickBooks Payroll tutorial, @Hector Garcia CPA answers the question, ‘How do I pay myself as a small business owner?’ Learn the difference between an owner’s draw and a payroll salary and why this is such an important decision to make when considering how to take money out of your business.

In this video:
0:00 How to pay yourself as an owner
1:29 Understanding Payroll Salary vs Owner’s Draw
4:07 Example of owner’s draw
5:12 Example of owner’s salary via payroll
6:22 Best practices for owner compensation

Leave a comment below and let Hector know what other questions you have about paying yourself as a small business owner or any other payroll topics.

Hector Garcia is a CPA (Certified Public Accountant), QuickBooks consultant and business owner. He is also just a big fan of Intuit QuickBooks! He has teamed up with QuickBooks to produce this video series about payroll.

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45 thoughts on “Owner's draw vs payroll salary: paying yourself as an owner with Hector Garcia |”

  1. My business pertains to engineering consultation. I have several contracts to provide engineering services with different customers. For both, compensation is based upon hours worked and billed. For one company a fillout a timesheet on a regular basis and they pay me as a direct deposit into my business account. They deduct for taxes such as federal income tax, FDIC and medicare taxes. They issue a W@ at the end of the year. For the other company, I track hours on my own timesheet and bill them via invoice on a monthly basis. They pay net 60 days. At the end of the year I receive a 1099. My business is set up as a partnership with my wife. Do you have any recommendations as to how to deposit money into the business and owner's draw versus regular salary?

  2. i am a single member llc, so would youconsider that the same as a sole proprietership ? at the end of the year my accountant does a P and L and i pay taxes on the profit, after taking what ever legal deductions i can such as IRA contributions. I dont really track any draws i take out throughout the year and dont write myself a paycheck. Am I doing something wrong?

  3. hector – best way to designate your 401K and Roth contribution withdrawals from business account ? If you can show how to organize it in Quickbook. thank you

  4. My question has nothing to do with payroll but how to setup and handle credit card processing fees, such as Square into QuickBooks Desktop. I don't have that many Square transactions so I will do all entries manually. Thank you!

  5. Q: I started my business and purchased all equipment and vehicles to setup the business outright. It consist of a vehicle and floor cleaning equipment which was purchased by me to setup the business. Now, I give these assets to the business and want to draw against the value I spent until I get my money back on the initial investment. How do I add those assets and their value to quickbooks online? how do I draw against their value?
    I do not see how to do this with the QB online. The desktop software is much easier to do this but I am working with the online software now and don't see how to add fixed asset.

  6. If I do a draw, and the company has to pay tax on it because its not an ordinary expense, where does that mean for the received amount. It is subject to personal income taxation also?

  7. Can the time spent working the business be considered an investment, (similar to the initial cash investment), to be "reimbursed" from the business at a later time? (similar to a repayment of the originally invested cash amount?)

  8. As a self employed business is it possible I can set up quick books to deposit money to me through by business but set up to we’re it takes 15.3 percent each deposit to keep up with the quarterly pay

  9. Your videos are amazing ! Thank you!! I need your help though on complex issue…I work for a Real Estate Investing (hard money lending) and all money is ACH . how do I record a loan, a customer payment to the loan and an investor payment to the investor for the same property? The investor pays us (funding the load) borrower makes payments to us and we pay the investors monthly from the % profits….ugh…I'm so stuck and my register is not showing every transaction. I need your help , PLEASE!!!! 🙂

  10. Thank you Hector, good info. Still have a question, I am starting to receive Social Security Benefits this year, because of the pandemic my business has drop to 30 to 40% from what it use to. Normally I had a monthly payroll/salary of $3500 monthly and a distribution of what ever the profits were after figuring it out at the end of the year. I do estimated taxes quarterly.
    I am considering paying myself way less if any as a salary and take whatever profit at the end of the year and still do estimated taxes each quarter. Will this raise red flags with IRS.

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