As an S Corp owner, you can legally transfer money from your business account to your personal account. An S Corp is a pass-through entity, meaning the business’ profits and losses pass through to the owners’ personal tax returns. Thus, the money in the business account is effectively the owners’ personal money.
To transfer funds, issuing a check to yourself or making an online transfer are both viable options. Documenting the transfer as an owner withdrawal is a critical step in maintaining clear financial records.
Potential Risks and Best Practices
While transferring money is legal, it’s important to be aware of possible risks such as commingling personal and business funds. Consulting an accountant and adhering to best practices, such as avoiding excessive transfers, can help mitigate these risks.
Banking fees are another consideration. If possible, use a bank that offers free transfers between business and personal accounts. Otherwise, be conscious of the fee structure of your bank when transferring funds.
Alternatives to Direct Money Transfer
Should a direct transfer not be feasible or desirable, paying yourself an owner’s salary or taking an owner’s draw are suitable alternatives. Both methods require proper documentation and consideration of tax implications.
Distributions and Owner’s Draws
Distributions are another means to move money from an S corporation to a personal account. This method is part and parcel of the S corporation structure, which facilitates the distribution of earnings to shareholders.
The most straightforward method to take an owner’s draw is via a written check from the business account to the personal account. An owner’s draw can also take the form of a non-cash asset, such as company-owned equipment. It’s important to note that payroll taxes are not immediately applicable to an owner’s draw.
Remember, despite these options, always consult with a financial advisor or accountant when making business financial decisions to ensure compliance with tax laws and financial regulations.