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how do I pay myself as an llc?

how do I pay myself do I take taxes from the business and my personal payment? what percentage of tax do I take?

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Most of my small business LLC owners use two methods, or a mix of both:

METHOD 1. They set up a payroll account on the general ledger for the company cutting regular paychecks for amounts they can afford based on revenue and expenses through the LLC checking account to the personal accounts of the employee member(s) (to include the owner, who is considered an employee. FICA, FUTA and SUTA are deducted, accounted for and paid to the government through company accounts as well. This method avoids self-employment taxes at year end. Many of my clients hire a payroll service company for this purpose to make sure they are compliant with the law as time goes on. They write off the cost for this as a business expense.

METHOD 2. They set up a retained earnings and/or owners equity general account and book revenue not used to cover expenses into that account. They then vote on making a distribution among the members, or if it is a single member LLC, simply make a decision to distribute an amount to the member(s) by again cutting a check from the company to the member's personal checking account. Since this is not an employee transaction, the amounts are subject to income personal taxes at year end and the company pays no payroll taxes on them. The advantage of this type of distribution is that the payments are not taxable until the distribution is made and can be deferred until the timing is tax advantageous in the future. (A growing family - another deduction - pending tax legislation, etc.).

Report Kenneth's answer

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P.S. - Consult the IRS web site and your state web site for information on tax amounts and deduction amounts for employees.

Report Kenneth's answer

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If you setup a sole proprietor LLC, the income is passthrough. Which means you get (income/revenue - expense), after you pay the self employment tax and LLC tax, then you keep the rest (same as pay yourself). On your tax return, your LLC income reports on Schedule C.

Report Dana's answer

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Most Certified Public Accountants, including myself, will recommend that once you get to about $ 40,000 in profits for your LLC, then you make an S Corp election with the IRS and you then start to pay yourself a payroll check - you are an employee of the S Corporation. This reduces your self employment taxes. You still remain an LLC for legal purposes. Otherwise, you will take an owner withdrawal from the business which hits the Equity side of the Balance Sheet. The IRS recommends that you setup a Withdrawal account in your accounting system if you want to take withdrawals. It is just the opposite of Contributed Capital; i.e. you put money into the business and you credit Contributed Capital vs. Debit Owner Withdrawal when you take money out. It does not have tax implications since it is not related to the Income Statement (Revenues / Expenses). Here is a recent CPA video that helps explain this > https://youtu.be/pAHtUtP4-Bw

Report Matt's answer

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