Kevin D.
Quevin, LLC - Passionate about planning, designing, and developing exceptional sites.
How to pay myself minimally, as owner and manager of an LLC?
This is my first year running my LLC, and I'm being very careful about the income. Since I have plenty saved to live off of as the business grows, I'm staying away from the business account, besides paying business expenses, until after tax-time in April. But how should I go about paying myself and avoid unnecessary taxation after that? Maybe you know of a good Web site to send me, or more, thanks!
Good Answers (5)
Sheilah E.
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There are a few ways, is it a single member LLC or a regular member LLC? The most common method is to just take an owners draw and classify it in the owners equaity as an offset.
You can also set up regular payroll, but unless you have employees I wouldn't do that. The profits of the LLC will be passed on to you as an owner and taxed accordingly anyway. Just be sure and be consistant with your method.
Sheilah
Melissa J L.
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This is also my first LLC. I am a single owner and my CPA recommended that I NOT set up a payroll for myself. This results in extra forms and hassles. Assuming that you are, indeed, a single owner, the business income will be taxed as ordinary income on your personal tax filing and subsequent money that you remove from the business should be considered a distribution of equity.
I don't know how it works for a multi-owner LLC, but either way, you should discuss your personal situation with a CPA. Since each person's situation is unique it is definitely worth it to have a CPA to make sure you get advice tailored to your situation.
Hope this helps.
If you are an LLC, you cannot be an employee. Do not set yourself up as one and withhold taxes. You are a "member" of the LLC which means you take draws and not paychecks. The way taxes are paid to the government are in the form of estimated quarterly payments. This is true for both the federal and state governments. Please contact me if you want further information. Mitch 262-478-0418
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LLC's are typically partnerships or single member (disregarded entities), in these cases, Mitch is correct. You take draws from the business and do not run payroll for the members. If you are set up to be taxed as a corporation, then you should run payroll for yourself. I would assume you did not elect to be treated as a corporation for tax purposes and should not pay yourself via payroll.
Kelly
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Joseph W.
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The one thing that needs to be mentioned is that if you are doing an LLC and you choose to pay yourself as an independent contractor or as a partner, you should remember to pay the self-employment tax when you are filing your personal returns.
Unless there is a special situation, the various ways of paying yourself all end up more or less the same final amount in taxes. The big difference is the amount of paperwork that you have to go through, and the timing of the tax payments.
