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Owner's draw
An owner's draw is money a business owner takes from a pass-through entity for personal use. A draw is not a salary and carries no tax withholding, because the owner is taxed on the business's profit rather than on what is withdrawn.
In plain terms: Taking money out of your own company when it is not a salary.
Why it matters
Owners are taxed on profit allocated to them, not on what they withdraw, which is why a year of small draws can still produce a large tax bill. For foreign-owned single-member LLCs each draw is also a reportable transaction on Form 5472.
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