If you’ve ever wondered how much you can (or should) take from your business—or why your bank account doesn’t always feel as full as your profits say it should—this episode is for you!

Glenn Harper and Julie Smith tackle a classic challenge faced by business owners—how do you actually pay yourself as an entrepreneur? Drawing inspiration from a recent lively dinner debate, Glenn and Julie talk about the difference between taking a draw versus running payroll, why cash flow discipline is crucial in those early ramen-noodle days, and the surprising tax realities every entrepreneur needs to understand.

From the myth that business owners can “just take out whatever they want” to the essential 50% savings rule, this episode delivers practical advice on managing your money, setting boundaries, and knowing when—and how much—you should pay yourself.

Additionally, they'll discuss why having a trusted advisor is important and preview upcoming deep dives into business structures and tax strategy.

This episode is brought to you by PureTax, LLC. Tax preparation services without the pressure. When all you need is to get your tax return done, take the stress out of tax season by working with a firm that has simplified the process and the pricing. Find out more about how we started.

Key Takeaways from the Episode:

1. Don’t Chase the Shiny Object (a.k.a. All That Cash in Your Business Account). It’s tempting to pay yourself whatever’s in the bank, but Glenn reminds us: “The more money you take out… the less money you have for the bad times or to invest back in your company.” Start by leaving enough cash cushion in your business to weather tough times and fund growth.

2. Start Small, Think Big. When your business is getting off the ground, think like you’re back in college—keep expenses lean and take only what you truly need. As Glenn puts it, “Pretend like you’re back in college, eating ramen noodles and you can’t take any money out.” Let your business account grow before ramping up payouts.

3. Draws, Payroll, and the 50% Rule. If you’re a sole proprietor or single-member LLC, you’ll usually take draws (withdrawals) instead of payroll at first. But as your income grows (think $80k+), it might be more tax-efficient to become an S corp and start using payroll.

Running a business doesn’t have to run your life.

Without a business partner who holds you accountable, it’s easy to be so busy ‘doing’ business that you don’t have the right strategy to grow your business.

Stop letting your business run you. At Harper & Co CPA Plus, we know that you want to be empowered to build the lifestyle you envision. In order to do that you need a clear path to follow for success

Our clients enjoy a proactive partnership with us. Schedule a consultation with us today.

Download our free guide - Entrepreneurial Success Formula: How to Avoid Managing Your Business From Your Bank Account.

Glenn Harper, CPA, is the Owner and Managing Partner of Harper & Company CPAs Plus, a top 10 Managing Partner in the country (Accounting Today's 2022 MP Elite). His firm won the 2021 Luca Award for Firm of the Year. 

An entrepreneur and speaker, Glenn transformed his firm into an advisory-focused practice, doubling revenue and profit in two years. He teaches entrepreneurs to build financial and operational excellence, speaks nationwide to CPA firm owners about running their businesses like entrepreneurs, and consults with firms across the country. Glenn enjoys golfing, fishing, hiking, cooking, and spending time with his family.

Julie Smith, MBA, is a serial entrepreneur in the public accounting space. She is the Founder of EmpowerCPA™, Founder of PureTax, LLC, COO for Harper & Company CPAs Plus, and Co-host of the Empowering Entrepreneurs podcast. 

Named CPA.com's 2021 Innovative Practitioner of Year, Julie led Harper & Company's transition to an advisory-focused firm, doubling revenue and profit in two years. She now empowers other CPA firm owners nationwide through consulting and speaking, teaching them how to run their businesses like entrepreneurs. Julie lives in Columbus, OH with her family and enjoys travel, coaching basketball, sporting events, and the occasional shopping spree.

Copyright 2026 Glenn Harper

https://creativecommons.org/licenses/by-nd/4.0/

Hello, everyone. Welcome to another edition of the Empowering Entrepreneurs podcast. I'm Glenn Harper.

Julie Smith.

How's it going, Ju?

You know, I tried this new protein coffee from, or I don't know, whatever you want to call it, from Starbucks. I don't know that I'm a fan.

Thumbs down.

No, I don't know that I'll, I'll ever get it again.

No, it's a shiny object. It's something new and exciting, but it is cool that it's iced, but, you know, shiny.

Speaking of shiny objects, it's a great lead in to our episode today.

It is, it is. We're gonna talk about the elusive concept of when you're an entrepreneur, a solopreneur, how do you pay yourself? How do you get money out of your company?

And this kind of came to light because a few days at dinner we were having a very heated discussion about what this could or could not look like. So this is the inspiration behind this, this episode.

So as a general rule, you have to always go backwards because when we all start as entrepreneurs, everybody things because you're self employed, you got all this money, so you're just like, well, how much do you make? Well, however much I want. I just go pull out whatever I need because I'm a multimillionaire as soon as I become a self employed. That's what everybody thinks. Well, I don't know. I don't know if that's not the case. So what ends up happening is you have to remember, as a general rule, if you're starting off your company, the key is, well, if you do, the general rule is that the more money you take out of your company, the less money you have for the bad times or, or to invest back in your company. So if you take all your profits out, you don't have any profit left. You have any cash left.

It's really hard to run your business if you don't know cash. So you really want to make sure your business is capitalized. Mean just have money in the bank now, how much? We'll get to that. But as a general rule, when you're first starting out, you have to kind of pretend like you're back in college eating ramen noodles and you can't take any money out and you let that cash grow into your business a little bit. Because if you take it all out, you and then you got to loan it back, then you're borrowing money and then it gets spiraled out of control quick. If your business takes off right away and we're making money, that's a different story. But most, most businesses, they start off a little slow, little bootstrap budget and they're trying to figure it out. But as you let that grow up, grow the money grow into your account, then your next step is to kind of figure out, well, how much the minimum I need to take out of my company at home to pay my bills.

Right. Most people, if they have the money in the bank account at the office, they can manage that budget of what they got to pay their bills at the office. It's when they pull the money out. You know what I'm saying with that.

Yeah. I mean I think it also goes back to how do you know as a, you know, whether you're a startup entrepreneur or an established entrepreneur, how do you know if you're taking the cash out of the company or are you using payroll or how do you start navigating those avenues?

So generally when you first start off, you're probably going to be a sole proprietor, probably a single member llc. And those when you take money out, it's called withdrawal. And you probably wouldn't have payroll when you first start out because it's probably the most, not the tax, most tax efficient way to do that. It's when you get established and you're probably going to be making more than say 80 grand a year, you'll probably turn into an S corp and you'll probably take some payroll out. But most people are going to start off as self employed and with that it's called a draw. And remember you're in the highest bracket at that level, which is again ends up being because you got to pay self employment tax, you got to pay federal, state, city, everything. Generally it's the 50 rule. So if you make 10,000 bucks, I know it's not a high, all the haters don't hate on me.

But if you, this is where we disagree.

If you use this rule forever, you will never have a problem with taxes unless you live in California. We got to bump it up a little higher. But as a general rule, if you need a hundred dollars, what that means is that again, assuming your spouse is working, probably so you're going to be in a nominal bracket or a higher bracket. You need a hundred dollars, you really need $200. Because a hundred of that, half of it's got to go to the tax man at some point. All the different agencies you have to pay. So if you need a hundred, you got to set aside 100. So as a general rule you're Self employed.

And you want to take some money out. Oh, I need some, I need a hundred bucks. Take a hundred bucks out as a draw, put in your personal account. But you should also take that other $100 and put it into your tax savings account. You can keep that in the business name. That's okay.

And just a, just a peek behind the curtain. So this is where our conversations usually go. A little rye size. So I'm like, okay, so I need a hundred to get 200. Okay. But I'm going to write off 4,000 things. So really I'm, I'm just at 100.

Well, that's a different, that's a different concept. Right. But I, and appreciate that. So what we have to do is.

That's how my mind works.

Correct. Well, as a, as a business owner, again, it's about if you don't have, if you're not making any money, you can't take any money out. And if you make money, the goal then is to figure out. We, we always say in the business, you don't want to bases a write off. It's a write off. Crane would say it's a write off. Everybody writes it off. Well, we're not saying a write off says that you're supposed to have something ordinary, necessary, reasonable, and the intent is for your business.

Like, I think I have to spend this to help my business grow. So a write off just means you're still spending money. You're just not. You're deducting it from your income so you don't pay tax on it, which is what we were talking about. So if you're making plenty of money, then yes, you're going to decide, do I want to go buy a grand piano for the office to write it off? I don't need a grand piano. Maybe I should go buy a marketing campaign or something like that. So it just depends on what you want to spend your money on and to trying to, I mean mentally, I.

Need that grand piano in order to do my work.

This is true. Some people, it's very important a new computer, whatever those things might be. So what you're trying to do is you have this operational side of what your business needs and then you have these things that you need to take out to go pay for things personally that are your personal budget. Sometimes you can find those things that you're spending for maybe personally that really are for the business. And that's when you would transfer, you'd pay for those things out of the business. So you can quote, write them off, but they're a legitimate business expense. And there's a lot of controversy out there of what is a business expense and what's not. But as a general rule, it's the intent.

Is it ordinary, necessary, and reasonable. And generally, the IRS says nothing's deductible unless it's. They say it is. And everything's taxable unless the IRS says it isn't, which is very odd.

I mean, I think that just goes back to the reason of why you need to have a trusted advisor that can advise clearly. I still need that advice. And don't sign tax returns. But I think that's where it goes back to why you need that trusted advisor. But I think to summarize kind of what you said, you know, why we kind of started this conversation, is when you start out, you take draws, and as you grow and get bigger, you're going to be taking some combination of draws and payroll. Perhaps you want to use the 50% rule. You want to make sure you have a budget set at home so that you're not depleting all the cash inside of your business. So as you start out as an entrepreneur, having some of those boundaries and, and guidelines will help set you up for success.

Did you just summarize that pretty well that you got chat GPT implanted?

Definitely.

No, that's exactly right. And remember, once you start making more money than you need in the business, that's when you can do something cool with it. And that might be invest back in the business. It might take a big chunk out. But as a general, we all know at home when you want to get paid and take your money out, whatever you take home, it goes in the vortex of doom and always gets spent, no matter how much it is. So if you can rely on a set amount every week or every two weeks, that you're just going to take this amount and you run your household on that, then the company's bank account grows bigger, and then you can take out big chunks and do some cool things because you already set the money aside for taxes so that, yes, you can always take your profit out. You're allowed to do it. You're going to get taxed on whether you.

Oh, this is a good part. This is a great question. We get all the time. Say your company makes 50,000 bucks.

And.

You don't take any money out of it. How much money are you taxed on?

Julie, this is the part I hate.

It's a trick question. You're taxed on $50,000. Let's say, the next year, the company makes no money, zero profit. But you pull out the $50,000 from the prior year. How much are you taxed on? Zero. You're taxed on when you earn it, not when you take it from your company. Assuming you're a single member LLC or a sole proprietorship, or even an S corp, you're not taxed on what you take. You're taxed on what you make.

And that is a really hard concept for people to get because most people don't even know what they make until the next year when they close out.

All their books, which, you know, we should do another episode. An idea is the difference on the different entity types and what's beneficial. So maybe that's a great idea for. For next week.

That sounds like a great one. So again, take your money out, enjoy it, but just don't take too much, because if you leave your company with no cash, it's really hard to operate a company when you have no money, because then you got to put the money back in. And that's never fun. There we have another edition of Empowering Entrepreneurs Podcast. I'm Glenn Harper.

Julie Smith.