In this episode of my Business Smarts podcast, I break down one of the biggest questions I hear from new and growing entrepreneurs: “How do I pay myself legally and stay out of trouble with the IRS?” I sat down with Leon, a business attorney who specializes in small business compliance, and we walked through how owner pay works based on your business structure—because the rules are not the same for everyone. If you’re a sole proprietor or a single-member LLC, we cover why you don’t put yourself on payroll and instead take an owner’s draw—moving money from the business account to your personal account—while still paying income taxes and self-employment taxes on net profit. If you’re an S-Corp (or an LLC electing S-Corp taxation), we explain the “salary first, distributions second” rule and why skipping payroll can look like tax evasion. We also talk about what the IRS considers a “reasonable salary,” common red flags like only taking distributions or paying yourself too little when the business is profitable, and why clean bookkeeping and separate bank accounts are non-negotiable. My bottom line: smart business owners don’t guess—get the right systems and professional support to protect your business and your peace of mind.