How Do I Pay Myself From My LLC? Paying Yourself from an LLC

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To pay yourself from an LLC, write yourself a check from your business account and deposit it into your personal account. This method, called the owner’s draw, transfers cash from your business to you for personal use. For multi-member LLCs, draws are divided among partners. Rules differ if the LLC is taxed as a corporation; you must also take a salary meeting IRS requirements in addition to any distributions received. Consider key aspects when paying yourself: LLC taxation offers flexibility. You can pay yourself as a W-2 employee. This treats you and other working owners as employees receiving paychecks. You can take distributions or dividends as payments from LLC profits; these are subject to income taxes. No one best way exists to pay yourself. Choose the method fitting your LLC type with the pros and cons suiting your needs.

Methods of Compensation for LLC Owners

Here are four main ways you can receive payments from your LLC:

  1. Pay Yourself as a W-2 Employee. For many LLC owners, pay yourself as an employee. In this arrangement, you receive paychecks as you would as an employee of someone else’s business.
  2. Take Distributions or Dividends. You can take distributions or dividends as payments from LLC profits; these are subject to income taxes.
  3. Pay Yourself Through an Owner’s Draw. This method of payment transfers a portion of the business’s cash reserves to you for personal use. For multi-member LLCs, these draws are divided among the partners.
  4. Receive Your Share of Company Earnings. Multi-member LLCs report income to the IRS, but each partner pays taxes on their share of revenue.

Almost all businesses make quarterly tax payments.

How members of a multi-member LLC get paid depends on whether it’s a partnership or corporation. By default, the IRS treats multi-member LLCs as partnerships.

As a partnership LLC, partners can take earnings as draws. However, the partnership is a “pass-through” entity.

Single-Member and S Corp LLC Payments

Single-member LLC owners pay themselves by taking money from profits. That process of extracting money is an owner’s draw.

S corp owners report salary on personal tax returns. The salary represents the member’s share of income, taxed at an individual rate. FICA taxes are withheld from each paycheck.

LLC members should talk with an accountant or tax professional when ready to make financial tax decisions.

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