How to Pay Yourself as a Sole Proprietor (Without Messing It Up)

Get started with QuickBooks to track your business income, log your owner’s draws, and stay ready for tax season here: https://startupwise.com/quickbooks/ ^ This is an exclusive link for my audience only, and right now, you can save 90% for your first 3 months. In this video, I go over how to pay yourself as a sole proprietor the right way, without messing up your taxes or draining your business account. A lot of new business owners get this wrong by thinking they need to give themselves a paycheck or treat their income like a salary. But as a sole prop, you and your business are legally one and the same, which means the IRS already sees your business income as your personal income. The real mistake happens when people mix personal and business money or forget to plan for taxes. Our favorite business must-haves: 💳 Best business credit cards: https://startupwise.com/creditcards 🏦 Novo (best business bank): https://startupwise.com/novo 🖥 Best AI website builder ($3/month using code STARTUPWISE): https://startupwise.com/hostinger/ ⚙ Northwest (best $39 LLC formation service): https://startupwise.com/northwestLLC 🎃 Try Gusto and get a $100 gift card with our link: https://startupwise.com/gusto 👨💼 Best overseas staffing agency (save 80% on payroll): https://paired.so/startupwise Be sure to watch this video until the end because I’ll break down what an “owner’s draw” really means and show you the easiest and safest way to actually pay yourself, using methods like Zelle or a simple bank transfer. I’ll also walk through why it’s so important to keep a separate business bank account, even if the IRS sees you and the business as the same. This keeps your bookkeeping clean and helps avoid problems down the line. One of the biggest mistakes sole proprietors make is overpaying themselves without keeping enough money in the business account for expenses or tax savings. Another common issue is not tracking how much they’ve paid themselves, which can be a problem if they ever get audited. And many forget about self-employment tax, which includes both the employer and employee side of Social Security and Medicare. If your net income is growing, it’s smart to talk to a tax pro and make sure you’re not losing money just because you didn’t plan ahead. If you found this video helpful, be sure to check out our other videos on: How to Pay Yourself From an LLC 2025 (Step by Step): https://youtu.be/uZQhUwC0uzs S Corp Distributions: How Much Should I Pay Myself?: https://youtu.be/xpEpMbYoqQY Request New Videos Here: https://forms.gle/k9TtfauggkEpAWNQA More tutorials on our website: https://www.startupwise.com Thanks for watching! I hope you have a wonderful day! – Chris #HowToPayYourself #SoleProprietorTips #LLC Timeline: 0:00 - Introduction 0:04 - Why Most Sole Proprietors Get This Wrong (Beginner Mistakes Overview) 0:39 - What Is an Owner’s Draw and How It Works 1:49 - Recap: Key Steps to Pay Yourself Properly 2:17 - Best Ways to Pay Yourself (Zelle, Bank Transfer, and More) 3:02 - How to Use Wire Transfers for Paying Yourself Large Amounts 4:23 - Crucial Reminders: Taxes, Business Expenses, and Overdrawing 5:17 - Conclusion Disclaimer: Some of the links above may be affiliate links, meaning I may receive a small commission if you click on them. The commission is paid by the retailers at no cost to you, and this helps to support our channel and keep our videos free. Thank you! All info from our videos is compiled from online sources and our own experience, and we encourage you to do your due diligence. We appreciate your viewership! In addition, we are not financial advisors. StartupWise does not provide tax, legal, or accounting advice. The ideas presented in this video are for entertainment purposes only. Please do your due diligence before making any financial decisions.