Benefits of Owning an S-Corp: Taking Distributions also known as a draw

Being the owner of your S-Corp affords many benefits that you can take advantage of.

For new S-corporation owners, and even many seasoned business owners, understanding how to utilize these benefits can be as challenging as understanding a foreign language.

It is important for you to remember that all of your personal income from the business does not need to be in the form of an employee wage. You can take owner distributions on top of your wage. Review our article about how the owner of an S-Corp is paid.

Always be sure to document these distributions. We have prepared this resource to teach you how to properly document these distributions.

First things first, what is a distribution?

A shareholder distribution is not an expense; it is the company paying the owner his or her share of profits from the company.

There are different ways to take a distribution.

• You can write yourself a check
• Make a bank transfer from your company account to your personal account
• Or take cash from the ATM.

That’s it!. Just take the money…but wait, there is one more step.

How to Track Distributions

Don’t forget to keep track of what you take out of the company. Tracking is the most important step. If you have QuickBooks, record this payment the same way you would a regular check as if you were paying bills.

Record Check

Steps: Make the check payable to you. The account to charge will be Distribution (or owners draw), which is an equity account.

Journal Entry

An alternative to recording a payment in QuickBooks is to create a journal entry.

Steps: Debit Distribution and Credit Cash for the amount you are taking.

Track on Paper or Excel file

If you keep track on paper, simply write the date, amount and a running tally on a sheet of paper. Keep track of this from January to December of each year and bring it to your tax appointment. We have created a downloadable excel file for you to track your distributions.

Owner Distribution Tracker