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How do I pay myself as a single owner LLC?
Anonymous2 views3 answers
I have been all over the internet seeking this information. Ran into a few helpful things but this is just all to confusing to me. I just recently started a small business. I am the only one in my company. How do I legally pay myself as an LLC owner? Can someone please help me understand this? Thanks.
There are two aspects to your questions. First, from a federal income tax standpoint, if you have not elected to have your LLC taxed as a corporation, it is a disregarded entity, and any payment to the LLC is considered a payment to you for tax purposes. However, to preserve the liability protection under Florida law, you have to pay yourself under the regimen for payment set up by your articles of organization and operating agreement. You should review these documents. If you still have questions after your review, you should contact an experienced business lawyer in your area to advise you on how to proceed.
As a single member (owner) LLC, you should pay yourself through draws (by periodically withdrawing money from the business). You will need to make federal quarterly estimated tax payments to the IRS. All of the profit of the business will be subject to self employment tax. You probably should work with a CPA to help you.
The answer depends on how you set the LLC up when you started it, and how you set it up when you got a Federal Tax ID Number (also known as Employer ID Number EIN or Federal Employer ID Number FEIN)
If you got a FEIN you would have told the IRS whether you want to be treated as a corporation or a sole proprietorship. If you didn't get an FEIN and haven't paid any taxes yet, you can choose how you want to be treated.
If you are treated as a sole proprietor, you and your business are basically not seen as separate financial entities, so you can just take whatever money you want out of the company any way you want to do it. You should keep track of things so you can deduct expenses etc. but legally you could have just one combined checking account for you and the business.
If you elect to be treated like a corporation it's a bit more complicated. If you just do nothing, you will be a C corporation and you can take money out as a loan, as a payment of some sort for rent, or royalties or as a consultant, or you put yourself on payroll. There are some risks with treating yourself as a consultant - for some tax purposes an officer of a corporation is considered an employee.
You really really should see a CPA if you've just set this business up. You can get yourself into some hot water if you don't set things up right in the beginning. I strongly urge you to see an accountant sooner rather than later.
