Owner's Draw
An owner's draw is money a business owner takes out of the business for personal use. It's not a salary or wage — it's a withdrawal from the owner's equity in the company.
Owner's Draw Definition
An owner's draw (or owner's withdrawal) is money taken out of a business by the owner for personal use. Unlike a salary, draws aren't subject to payroll tax withholding — but the underlying business income is still taxable.
Owner's Draw vs. Salary
How Draws Work
1. Owner writes a check or transfers money from business to personal account
2. Transaction is recorded as a debit to Owner's Draw (equity account), credit to Cash
3. At year-end, the draw balance reduces owner's equity on the balance sheet
4. Draws are NOT a business expense — they don't appear on the P&L
Tax Implications
Draws themselves aren't taxed. But the business income that funds the draws IS taxed on your personal return. For sole props: you pay income tax + self-employment tax (15.3%) on net business income, regardless of how much you actually drew out.
How Draws Show Up in QuickBooks
Record draws to an Owner's Draw equity account. In QBO: create an equity account called "Owner's Draw" and categorize each withdrawal there. At year-end, your accountant will close this to retained earnings.
FAQ
Q: How much can I draw from my business?
A: Legally, as much as you want (for sole props and partnerships). Practically, don't draw more than you can afford — keep enough to cover expenses, taxes, and a cash reserve.
Related Terms
> Need help making sense of your books? Ketchup cleans up your QuickBooks in 3–7 business days — so your numbers actually make sense. Get your price →
Related Terms
A discount is a reduction from the normal selling price, offered to customers for early payment, bulk purchases, promotional purposes, or other business reasons. In bookkeeping, discounts can be recorded as contra-revenue (reducing gross sales) or as an expense, depending on the type and purpose of
A receivable (or "accounts receivable") is money owed to your business by customers for goods or services you've already delivered. When you send an invoice with payment terms like "net-30," the amount becomes a receivable — an asset on your balance sheet representing future cash inflow. Receivables
An audit trail is a chronological record of every change made to your financial records — who did what, when, and why. It's the digital paper trail that proves your books are legit. Every transaction created, edited, or deleted gets logged, creating an unbreakable chain of accountability.
Book value is the value of an asset on your balance sheet after subtracting accumulated depreciation or amortization. It represents what the asset is "worth" according to your accounting records — not necessarily what you could sell it for on the open market. Book value is also used to describe the
Need these terms applied to your books?
Accounting Ketchup catches up your QuickBooks so the glossary becomes your reality. Flat rate.