Owner’s Draw for S-Corp?

by Jerry


I just opened my business 3 months ago and am using QuickBooks Online Edition. I am the sole owner of my S coprporation.

To pay myself I use the Owner’s Draw account. Do I have to report those draws in my personal income tax as an income and also pay taxes on the net income of the business even though my draws do not affect the business net income?

What is the best way, in my case, to get paid and fulfill the requirements of the IRS?



Jennifer replies:

I’m so glad you asked Jerry! This is an important question.

Corporate officers do not get draws. They need to be on payroll, as employees. So the first thing you need to do is to signup for an inexpensive and reliable third party payroll service, like Paycycle.

I use and recommend Paycycle because it is so user friendly. This is an extremely important issue for you. I suggest you get started today, seriously. Visit the following url for more information on this awesome payroll service:


Next, you need to get your equity accounts setup correctly. This is not something I can do in a Q&A format like this. The best advice I can offer is to get paid help. There are important variables that I cannot know or address here. Whether it’s me or somebody else doesn’t matter – it needs to get done soon.

Last, once you find somebody to help with the equity accounts, get their advice on how to reclassify the “draws.”

Having a corporation is more complex than having a sole proprietorship. Get paid help soon -in this situation, it’s very true that “an ounce of prevention is worth a pound of cure!”

Write again and let me know how it all goes.

Comments for Owner’s Draw for S-Corp?

Feb 09, 2009 Payroll for Quickbooks

by: Induna

I have a 30 year old company and use Peachtree that has payroll integrated in the application, and I love it.

However, I also act as accountant to my daughter’s company that uses Quickbooks. The payroll is a separate module by Aatrix and this system sucks! I have gradually and grudgingly become to feel comfortable with QB but it still leaves a lot to be desired in many respects, and Aatrix does it no favors!

You have a very useful web site that helped me work out some issues with classes. Thanks.


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