How to Pay Yourself as a Single-Member LLC
As the owner of a single-member LLC, you pay yourself through an owner’s draw by taking money out of the LLC’s profits as needed.
How to Pay Yourself from a Multi-Member LLC
Paying yourself as a partner in a multi-member LLC involves taking earnings as draws, where each member pays a portion of the total income tax on the partnership’s earnings.
Understanding LLC Basics
LLCs combine features of corporations, partnerships, and sole proprietorships. Owners, known as members, can be individuals, corporations, or other LLCs and enjoy tax flexibility.
Different Ways to Pay Yourself
- Pay Yourself through Owner’s Draws: LLC owners generally receive income through owner’s draws, allowing access to business cash reserves for personal use.
- Consider Payroll: LLC owners actively working in the business can set up payroll to pay themselves wages, treating themselves as employees and withholding taxes.
Paying Yourself from an LLC Taxed as a Corporation
- W-2 Employee: Owners can draw a salary through traditional payroll, filing taxes and paying Social Security and Medicare.
- Profit Distributions: Another option is to make profit distributions at lower tax rates, as long as all income is not derived from business profits.
LLC Member Payments
Members in an LLC can distribute profits through guaranteed or non-guaranteed payments, or by drawing from their capital account.
Tax Implications
LLC owners need to pay income and potentially self-employment taxes on funds drawn from the business. It’s essential to consider tax consequences when choosing how to pay yourself.
Legality and Compliance
It is crucial to follow guidelines and laws when paying yourself as an LLC member to avoid potential fines or legal issues.
Consult a Professional
For personalized tax advice and guidance on how to pay yourself from an LLC, consult with a CPA or tax advisor familiar with current tax regulations.