How do I pay myself from my LLC?
Short answer
If your LLC is taxed as a sole proprietorship, you pay yourself by transferring money from your business account to your personal account as an owner's draw. If it's an S-Corp, you pay yourself a salary through payroll, plus distributions.
Otavio Mayole, Co-founder, DeCypher FinancialsUpdated
Sole proprietor or single-member LLC
- Move money from business checking to personal checking. That's an owner's draw.
- A draw isn't a paycheck or a write-off. You're taxed on your business profit, not on what you take out.
- Pick a rhythm, like twice a month, so your books stay clean.
S-Corp
- A reasonable salary through payroll, with taxes withheld
- Distributions of the remaining profit, taken from the business account
- Reimbursements for business costs you paid personally, through an accountable plan
Partnership
- Guaranteed payments for your work, and distributions of your share of profit
One mistake we see: paying yourself as a contractor through a payment app, which can create a 1099 in your own name and extra self-employment tax.
Whatever your setup, move your tax set-aside first, then pay yourself from what's left.