If you file the businesses on schedule C for sole proprietor/self employed/single member LLC you do NOT pay yourself with a W2. So that was wrong. You need to go to a professional CPA, etc. to get it all straightened out.
If you are self employed/sole proprietor etc. you cannot deduct your own salary or any personal withdrawals you make from your business or expense your own time. As a sole proprietor, you are not an employee of the business. The business is a disregarded entity and the Net Profit or Loss is your personal income or expense.
