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When should I take a salary?
Reviewed by Editorial Team

The common new-owner mistake is taking nothing for six months, then taking too much in month seven. Steady is better than spiky. Sole proprietors and single-member LLCs take owner draws — transfers from business to personal. Set a modest monthly draw at launch and track it. For LLCs taxed as S-corps and full S-corps, the IRS requires reasonable salary via W-2 payroll before distributions. Reasonable means comparable to what you would pay someone else for the same work; for a working owner-operator this lands around $35,000-$60,000/year per IRS guidance. Distributions on top of salary avoid self-employment tax — the main S-corp benefit. Raise the draw or salary only after 6 consecutive months of covering all expenses plus the current draw with cash left over. A licensed CPA or attorney in your state should review your specific situation.

Common mistakes
  • Paying yourself nothing for months, then $10,000 in one shot when an event lands.
  • Treating distributions as a substitute for salary in an S-corp — the IRS audits this aggressively.
  • Confusing "I had a good month" with "the business can sustain a higher draw".
Related FAQs
How do I structure my LLC?
File LLC articles of organization with your state secretary of state, write an operating agreement (even solo), get an EIN, open a business bank account, and elect S-corp tax treatment only after net profit reliably exceeds the IRS reasonable-salary threshold. A CPA should run the math.
How do I file food truck taxes?
File federal income tax (Schedule C if LLC single-member, Form 1120-S if S-corp), quarterly estimated tax payments, state income tax where applicable, state sales tax monthly or quarterly, and federal payroll tax (Form 941) if you have employees. A CPA is cheaper than IRS penalties.
How do I get a food truck loan?
Options include SBA 7(a) loans (best rates, longest underwriting), SBA microloans (up to $50,000), traditional bank business loans, equipment financing for the truck itself, and specialty lenders. Strong personal credit, a clean business plan, and 10-30% cash down typically win approval.