Managing Member Salary in an LLC
It’s a newly formed LLC, and there’s no income, probably not for many months, so realistically can’t pay any salary to the manager. Meanwhile, it is a bit odd that the LLC is manager-managed, yet the manager is the sole member. If a limited liability company’s manager is to receive a salary, a provision to that effect is included in the LLC’s Operating Agreement. How and where can I put a provision to pay the manager salary in arrears as and when the LLC is in profits?
LLC Compensation and Taxation
Owning and operating an LLC involves responsibilities, including understanding how to properly compensate yourself. You write a check from your business bank account to your personal bank account. In bookkeeping terms, this translates to a debit in your owner’s equity and a matching credit in the owner’s draw account. However, you must pay income tax on your LLC’s profits, whether you leave them in the business or take them out as a draw. On top of this, you may need to pay self-employment taxes, covering both Social Security and Medicare, at 15.3%.
LLC Structure and Management
A limited liability company (LLC) offers its owners liability protection without the complexities of a corporation. For example, if you want to set up shop, you generally have three choices: a corporation, a partnership, or an LLC. An LLC is a legal business entity that provides some liability protection similar to a partnership. An LLC can have different types of owners, including some business types.
In a member-managed LLC, all members are considered managers. Member-managed LLCs are for people who want to run their own business by making and selling products, taking orders, and providing services. So if you and the other members of your LLC want to be directly involved, you’ll want a member-management structure.
To avoid conflicts, consider adding all responsibilities of a managing partner to the LLC’s documents. There are two possible management structures: manager- or member-managed. The structure might change based on the agreement. In a member-managed LLC, the owners oversee operations. In a manager-managed LLC chosen by members, managers administer the company.