How to Move Money Between Business and Personal Without Breaking Rules

Move money legally between business and personal accounts using proper documentation and tax-compliant methods.

1. Set up owner's draw for LLCs and partnerships. Transfer money as an owner's draw if you're in an LLC or partnership. Document each transfer in your books as a reduction in owner's equity. No payroll taxes apply, but you'll owe self-employment tax on your share of business profits regardless of draw amount.
2. Pay yourself salary if you're incorporated. Run payroll for yourself if you operate as an S-Corp or C-Corp. The IRS requires "reasonable compensation" — typically $40,000-$80,000 for most small business owner-operators in 2026. Use a payroll service to handle withholdings and quarterly filings.
3. Reimburse documented business expenses. Transfer personal money you spent on business expenses back to yourself as reimbursements. Keep receipts, bank statements, and a log showing business purpose. Common examples: office supplies purchased with personal cards, mileage at $0.67 per mile, home office utilities.
4. Use formal loans with documentation. Create written loan agreements when lending money between personal and business accounts. Include interest rate (minimum 4.5-5.5% in 2026 to avoid IRS imputed income), repayment schedule, and collateral if applicable. Record as liability on business books.
5. Track every transfer in your books. Record all movements in your accounting system with clear categorization. Owner's draws reduce equity, salaries are payroll expense, reimbursements offset the original expense categories, loans create assets or liabilities. Maintain separate bank statements for audit trails.