What You Take Home Isn’t Always What You Made

If you're a business owner—especially a contractor, real estate investor, or service-based entrepreneur—your bank account might not be telling you the full story. Sure, money’s coming in and going out. But when you look at your bank balance or swipe to transfer yourself some cash, you might be thinking:

“Is this what I actually earned?” The answer?

Not exactly. Let’s unpack why your take-home cash isn’t always a reflection of your business’s true profit.

1. Your Draw or Distribution Isn’t an Expense

If you're a:

• Sole proprietor
• Single-member LLC
• S-Corp owner

…the money you pay yourself doesn't show up on your Profit & Loss (P&L) statement like payroll does for employees. Here’s how it breaks down:

• Sole props & LLCs: Your “paycheck” is an owner’s draw. It comes out of equity, not expenses.
• S-Corps: Your W-2 salary will show up as a payroll expense on the P&L, but owner distributions won’t.

So if you pull $5,000 from the business, your P&L might still say $10,000 profit. That can feel confusing.

2. Profit Is What’s Left After All Business Activity

Let’s say your business made $25,000 this month and spent $15,000 in expenses. Your P&L shows $10,000 net income. But maybe you pulled out $8,000 to pay yourself and left $2,000 in the bank.

That $8,000 isn’t counted as an expense, because it’s your draw or distribution—not an operating cost. That means:

- You had a profitable month

- But your bank account dropped by more than the $2,000 left over. See the difference?

Personal Spending From the Biz? It’s Not Profit Either

If you’re using the business account to cover personal expenses—groceries, car payments, or your Netflix subscription—that doesn’t make it a business expense. And it definitely doesn’t lower your taxable profit. It just muddies the financial picture and can get you into trouble at tax time.

4. Want to Know What You Actually Made?

To really understand your earnings as a business owner, you need to look at:

• Your P&L (to see true business performance)
• Your Balance Sheet (to see what you’ve taken out vs. what’s retained)
• Cash flow (to see where your money actually went)

And if that sounds like a lot?

We’ve got your back.

Let’s Make Your Numbers Make Sense

At Bookkeepers Lane, we specialize in bookkeeping for real estate portfolios, contractors, and service-based businesses. We break down your financials so you know:

• What you earned
• What you took home
• What your business is actually worth

Want clarity on your “real” paycheck?

Grab an Instant Quote today or message us to learn more.