Photo: Tim Samuel

Is it better to pay yourself through an LLC?

Paying yourself from an LLC as an employee allows you to receive regular compensation that you can plan on throughout the year, which can be very helpful if you are seeking a regular income.

legalzoom.com - How to pay yourself in an LLC | LegalZoom

How do you make a living on social media?

5 best ways to make money on social media as a creator Partner with brands. ... Become an affiliate. ... Sell your own merch. ... Offer premium...

Last updated Sep 20, 2019

How powerful is social media?

Social media is a powerful communications medium, with widespread influence over cities as well as remote areas. However, it is only part of the...

Last updated Mar 15, 2019

Promotion

Forming a limited liability company, or LLC, can be a great way to organize your company and protect yourself from liability. However, you still need to earn a living, so you may be wondering, "How to pay myself from my LLC?" The two most common options are to treat yourself as an employee with wages, or to treat yourself as an LLC member and receive distribution from the profits.

Paying yourself as a wage earner

Paying yourself from an LLC as an employee allows you to receive regular compensation that you can plan on throughout the year, which can be very helpful if you are seeking a regular income. To be able to pay yourself wages or a salary from your single-member LLC or other LLC, you must be actively working in the business. You need to have an actual role with real responsibilities as an LLC owner. Where there are multiple owners, if all of the LLC members participate equally in the operation of the business, you can't pay one a salary and not the others. However, if you are the only member that has a management role, you can pay yourself a salary without setting up salaries for the other participating LLC members. Employee wages are considered operating expenses for the LLC and will be deducted from the LLC's profits. The Internal Revenue Service (IRS) only allows reasonable wages as a deduction, so be sure any salary you pay yourself is within industry norms. You can also issue bonuses to LLC members who are employees, including yourself. Again, these must be reasonable related to the salary being paid. You'll need to file IRS Form W-4 to determine the amount of payroll withholding from each paycheck you receive. The LLC will pay you as a W-2 employee and will withhold income and employment taxes from your paycheck. You will pay income tax on your wages earned.

Receive distributions from LLC profits

Another option for how to pay yourself in an LLC is to receive distributions of profits from the LLC each year. Each member owns a percentage of the LLC, called his or her capital account. Year-end profit distributions are made based on that percentage. So if the LLC had $100,000 in profit and you and the other member each own 50%, you can each receive $50,000. You also could set up a draw to receive ongoing payments as a draw against the year-end profit. If you expect your percentage of the year-end profit to be $12,000, you could set up a draw to receive $1,000 each month. The total of all the draws throughout the year are deducted from the total year-end profit. So if your draw for the year totaled $12,000, but your share of the profit ends up being $15,000, then you would receive $3,000 at the end of the year. If you are the only member of the LLC, you will pay income tax on your distributions and you will file Schedule C to report the profits and losses of the LLC with your personal tax return. If there is more than one member, the IRS treats the LLC as a partnership and you each report your share of the profit and pay income tax on that. The LLC will file IRS Form 1065 to report how profits are divided among the members.

How bonus is paid in Google?

"Sign-On Bonus: Google will pay you a one-time Sign-On Bonus of $30,000.00, less applicable deductions and tax withholding, within thirty (30) days...

Last updated Mar 25, 2018

Why are bonuses withheld at 40 %?

Why are bonuses are taxed so high? Bonuses are taxed heavily because of what's called "supplemental income." Although all of your earned dollars...

Last updated Oct 10, 2018

Promotion

It's important to note that receiving a salary and receiving year-end distributions are not mutually exclusive. If you get a paycheck, you're still a member of the LLC and entitled to your year-end distribution.

Work as an independent contractor

A third option for paying yourself is to hire yourself as an independent contractor, doing work for the LLC you also own. Here is an example: If you are a member of an LLC that prints signs, you can hire yourself as an independent contractor to do the graphic design for the signs. This type of arrangement may not offer as many benefits, though. If you choose to pay yourself as a contractor, you need to file IRS Form W-9 with the LLC and the LLC will file an IRS Form 1099-MISC at the end of the year. You will be responsible for paying self-employment taxes on the amount earned.

Choose not to receive payments

You also have the option to not pay yourself anything and to leave the profits in the LLC. You still will need to pay income tax on the profit earned, since the profits from your LLC pass through to your personal tax return.

Why choose LegalZoom?

LegalZoom does right by you and will refund our fee within the first 60 days if you're unhappy with our services. We've got you covered in all 50 states. Have peace of mind knowing LZ's documents have been legally recognized in every state—and you'll never need to leave home to work with a lawyer.

Flat-rate fees. No hourly charges. No surprises. Really.

legalzoom.com - How to pay yourself in an LLC | LegalZoom

What performs well on Instagram?

Which type of content works best on Instagram? Entertaining, unique, niche-specific, motivational, and actionable content works well on Instagram....

Last updated Jul 24, 2018

Do FB pay you?

Yes, you can make money on Facebook. The platform has released a number of new features that allow creators, influencers, and brands with Facebook...

Last updated Apr 21, 2018

Promotion

What country doesn t have TikTok?

Although video-sharing app TikTok was developed by Chinese company Bytedance, it is not available in China. Instead users can download a twin app,...

Last updated Dec 21, 2020

Promotion

Can you make money with 1k followers?

Earning your followers' trust and engaging with them will help your account grow. More than the number of followers, brands look for influencers to...

Last updated Oct 15, 2019