Paying yourself wrong can trigger IRS issues, messy books, and unexpected tax bills.

In this episode, we break down exactly how LLC owners should pay themselves in 2026 based on their entity type and tax election.

You’ll learn the 3 primary ways business owners get paid: owner draws or distributions, payroll, and guaranteed payments. We explain which payment methods are legally allowed for single-member LLCs, partnerships, and S corporations, and why running payroll as an owner is prohibited unless you have an S corporation election.

We walk through how each method is taxed, how it shows up in your financial statements, and why owner draws do not reduce business profit even though they reduce cash.

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Chapters

(00:45) Why Paying Yourself Correctly Matters
Improper owner pay can create audit risk, illegal compensation setups, and accounting problems that surface later during tax season.

(01:25) Owner Draws and Distributions Explained
What an owner’s draw actually is, how it works, why no taxes are withheld upfront, and why draws don’t reduce business income.

(02:55) Guaranteed Payments for Partnerships
How guaranteed payments work in partnerships, when they’re used, how they’re taxed, and why they’re different from draws.

(04:10) Paying Yourself as a Single-Member LLC
Why single-member LLC owners can only take owner draws, and why running payroll to yourself is not allowed by law.

(05:05) Paying Yourself in an LLC Partnership
The two legal options for partners.

(06:00) Paying Yourself as an S Corp Owner
Why S Corps require a reasonable salary, how payroll and distributions work together, and where tax savings come from.

(07:00) How to Document Owner Pay Correctly
How draws hit the balance sheet, how payroll hits the income statement, and why documentation matters for audits.

(09:30) What to Do Next as an LLC Owner
How to choose the right pay method, set up a system, plan for taxes, and avoid common compensation mistakes going forward.

Podcast Host:

Mike Jesowshek, CPA – Founder and Host of Small Business Tax Savings Podcast
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🎙 ABOUT THE PODCAST
The Small Business Tax Savings Podcast is your go-to resource for cutting-edge tax strategies to help entrepreneurs legally slash their tax bills. Hosted by Mike Jesowshek, CPA, this show breaks down complex tax topics into clear, no-fluff insights so you can keep more of your hard-earned money.

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