Owner's draw, distribution, contribution & pay
Money you take out or put into your business isn't income or expense — here's how each type is recorded.
Owner's draw, distribution, contribution & pay
Money you move between yourself and your business is equity, not income or expense. An owner's draw or distribution is money you take out; an owner's contribution is money you put in; owner's pay (a W-2 salary) only applies if you run payroll for yourself.
Getting these right keeps your profit accurate — and you don't have to make the judgment calls on your own; your bookkeeper sorts them out with you. (S-corporations have one extra wrinkle: owners are expected to take a "reasonable salary," and we'll walk you through what that means for you.)
We're expanding this guide
A fuller explainer is on the way; your bookkeeper handles the judgment calls.
What this article will cover
- Draw vs. distribution vs. contribution vs. salary
- Why these never show up as revenue or expense
- S-corp "reasonable compensation" in brief
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