How to Pay Yourself the Right Way as a Trades Business Owner

If you own a plumbing, electrical, HVAC, landscaping, or contracting business, you’ve probably asked this at some point:“How do I actually pay myself?”

You’re not alone. The answer depends on how your business is legally structured. Whether you're a solo operator or growing a crew, here’s what you need to know to pay yourself correctly and stay on the right side of the IRS.

1. If You’re a Sole Proprietor or Single-Member LLC

How you pay yourself:As a sole proprietor or single-member LLC, you pay yourself through what’s called an "owner’s draw." This means transferring money from your business account to your personal account.

What to keep in mind:

• You are still responsible for paying taxes on all income.

• Set aside 25 to 30 percent for income and self-employment taxes.

• Keep business and personal expenses separate to avoid confusion and issues with tax reporting.

2. If You’ve Elected S-Corp Status

This structure has different requirements.

How you pay yourself:As an S-Corp owner, you are required to pay yourself a reasonable salary through payroll, which includes tax withholdings. You can also take additional income as distributions, which are not subject to self-employment tax.

Why it matters:This structure can lead to significant tax savings if managed correctly. You will need to run payroll, file regular tax reports, and follow IRS compliance rules.

3. Avoid Random Transfers Between Accounts

One of the most common mistakes trades business owners make is transferring money between accounts without a clear system. This creates messy records and potential audit risks.

Instead, make sure to:

• Establish a regular pay schedule

• Maintain separation between personal and business finances

• Keep detailed records of all payments to yourself

4. Plan for Taxes Throughout the Year

No matter how you pay yourself, tax obligations still apply. The IRS expects accurate reporting and timely payments. Working with an accountant can help you plan ahead, make estimated payments, and avoid surprises when tax season arrives.

Need Help Setting It Up the Right Way?

We work with trades business owners every day to help them pay themselves properly, stay compliant, and reduce their tax burden.

Book your free 45-minute advisory session today to get personalized guidance from a real accountant. You’ll walk away with clear answers and an action plan tailored to your business.