Owner's Draw

An owner's draw is how sole proprietors, partnerships, and many LLC owners pay themselves. Unlike a salary (which is a business expense), a draw comes from the owner's equity in the business. It doesn't appear on the P&L as an expense — it reduces equity on the balance sheet.

Draw vs. salary

If your business is structured as an S-corp, you're typically required to pay yourself a reasonable salary before taking distributions. The salary is a business expense; the distribution is a draw from equity. For sole proprietors and single-member LLCs taxed as sole proprietors, you just take money out as a draw.

The Simple Numbers problem with draws

Greg Crabtree's Simple Numbers framework flags a common and serious problem: many small business owners take draws instead of a market-rate salary, which makes their P&L look more profitable than it really is. Crabtree insists on accounting for owner's pay at market rate before evaluating any other metrics — including LER.