How to Pay Yourself From An LLC? (5 Ways)

LLC business owners typically discover the most beneficial method of payment is to treat themselves as employees. In this situation, you—and any other active owner within the business—are both employee and owner; subsequently receiving paychecks similar to working in someone else’s company.

By having your business generate reliable income to cover your wages, you can make tax savings and make sure that steady pay is provided for your household. The IRS requires “reasonable compensation” and does not dictate a specific amount; it simply that reasonable salary needs to be an appropriate sum someone in the same role would receive.

If you take your pay in this manner, you can elect to be regarded as an S-corporation for taxation purposes. The advantage of doing so is that the FICA, Medicare and Social Security taxes (popularly referred to as “self-employment tax”) are only levied on the wages or salary paid out by your business – not all profits made. This could result in a 15% decrease in income tax, when it comes to paying taxes on some revenue!

Although you may think that paying yourself as an independent contractor will save your small business money, this isn’t usually the case. With a contract-based employee, there are no payroll taxes to be deducted from their salary–leading them to receive their entire pay in one lump sum. However, in lieu of these deduction tax payments not being taken out at individual tax sources, self-employment tax must be paid when filing quarterly taxes as a freelancer or contractor. Ultimately meaning it rarely grants any financial benefit for either party!

This approach can be quite intricate, as you must submit taxes for both the personal assets of your LLC and the services rendered by yourself (as either a sole proprietor or an owner of another distinct LLC). It could be useful if you are part of an LLP that isn’t actively managed by you yet is willing to provide limited services; however, it won’t prove beneficial in most cases if you own and manage your individual business.

As the owner of an LLC, you’ll need to transfer funds from your small business owner’ bank account into your personal one in order to pay yourself. Your company’s personal bank account also is used for receiving revenue, holding money and paying expenses; when it comes time to receive payment as a business owner, simply move the necessary amount from that source into your individual checking or savings.

Depending on the kind of LLC you operate, there are multiple ways to transfer funds.