Paying Myself * LLC Company

[JRMS]

I am confused on a couple of things concerning paying myself from business profits. I am the owner of the company. I hear people talking about paying themselves. Are that referring to putting themselves on the payroll. I am the only employee. By paying myself will that help will Payroll Expense deduction. If I pay myself would I have to pay all the tax such as a W2 worker. Please advise.

 

[franklin97355]

Some of your answers will depend on where you live and do business. If you pay yourself as an employee you will probably have to keep records and pay taxes etc. I's recommend paying a lawyer that does work with LLCs for an hour or two of his time to explain the requirements you need to follow.

The answer is "42"

 

[JRMS]

Thanks for your suggestion. I think I will take your advice.

 

[chiph]

In addition to the lawyer advice, I would start by talking to your accountant.

Chip H.


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[skiflyer]

See an accountant... in IL we don't pay ourselves, we make "distributions to members"... no payroll deductions, but no withholding taxes or SS contributions, etc.

 

[Sheco]

In a law firm the partners might take a "draw"

 

[pansophic]

If you are a corporation (this generally includes C corps, S corps and LLCs) then you are required by law to pay yourself a "reasonable" salary (read W2 or 1099 wages). Beyond that you can pay yourself through distributions (or draws).

Of course there is no definition of what "reasonable" is from the IRS, so I've seen a lot of people who run technology companies paying themselves $30K per year and taking more than $100K in distributions. It cuts down on their FICA fees quite a bit, but it is more daring than I am willing to be.

Either way, you still have to pay estimated taxes for the quarter in which the money was earned.

You really want to talk to an accounting professional to get an idea of what "reasonable" is for you industry/locale and you want to make sure that all of your estimated payments are properly filed.

Out of curiosity, are you an S Corp, LLC or sole proprietor?


pansophic

 

[skiflyer]

LLC sole ownerships are different too... everything is all different based on a bazillion factors, find an accountant

 

[JRMS]

Thanks for the responses. I will look for an accountant. I am trying to pay as less tax as possible. With Payroll expense deduction (I assume) I will owe less on the gross minus deductions.