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How do you pay yourself as LLC owner

Discussion in 'Business & Tax Advice' started by everythingred, Oct 15, 2012.

  1. everythingred

    everythingred Jr. VIP Jr. VIP Premium Member

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    So I registered a business with my business partner through my federal government and now comes the question of pay. Before we open our ecommerce store for business, we need to discuss how we are going to get paid (salary or dividends). I wanted to hear from other business owners what they do or what they recommend. thanks!
     
  2. nativepro

    nativepro Power Member

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    An llc doesn't have shareholders, so you can't get dividends. If you have 2 members at 50/50, then you're taxed as a partnership. You need to setup a corporation if you want the option of a salary or dividends.
     
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  3. everythingred

    everythingred Jr. VIP Jr. VIP Premium Member

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    I'm from Canada so we don't really have LLC, it's called corporation, that's what I'm registered as (I didn't want to make a longer title and thought they'd be similar).
     
  4. nativepro

    nativepro Power Member

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    Ah gotcha...in that case I would talk with an accountant. He/she can go over the different options with you, and based on your earnings estimates, give you the best solution to pay the least amount in taxes.
     
  5. everythingred

    everythingred Jr. VIP Jr. VIP Premium Member

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    Thanks. Just wanted to check if BHW had some black hat knowledge about this if you know what I mean.
     
  6. Cshark

    Cshark Jr. VIP Jr. VIP

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    Black hat knowledge about splitting the profits of LLC? Am I reading it right?
     
  7. 4kbmcc

    4kbmcc Registered Member

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    I suggest paying yourself without deductions and then paying quarterly taxes. I assume you are a US resident. Also, if you're making any money consult with a CPA. It's worth it
     
  8. b1step-ahead

    b1step-ahead Power Member

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    LLC'S can be taxed as a corporation or sole proprietor. If your a single memeber llc, just you, then its pretty easy. An exception is that if your wife is involved, it can still be taxed as a sole proprietor, the income comes from income minus expenses (you can really hide your money). Now as a partnership your a llp limited liability partnership. You have to figure out if everyone is a member or manager. If your pulling in 20k a month minus expenses than you have have a salary and re-invest the rest. If your by yourself, you can figure it out. But if a partner is involved, do yourself a favor and go see a lawyer or accountant.
     
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  9. bitencrypt

    bitencrypt BANNED BANNED

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    Pay all operating expenses, and what you have left over is your 'NOI' net operating income. then pay your taxes.
     
  10. GauravJ

    GauravJ Power Member

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    By way of allowances and Director's fees

    Also check respective countries companies law and taxation rules to get most benefit out of it.
     
  11. Moneyman94

    Moneyman94 Junior Member

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    A simple structure that has worked for decades is to have a nevada "C" corp. Also set up an LLC or LP in the state you are doing business in. The LLC hires the corp as a management company. The C charges a monthly management fee. Then you are paid in the form of reimbursments for monies you spent to keep the business running, as an example you can get reimbursed for any medical expenses you incur that are not fully covered, you can set up a college reimbursement program for your kids, I mean your employees, I think you get the idea.
     
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  12. Monetizesocial

    Monetizesocial Newbie

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    Its pretty simple since the profits pass through... Consult with your CPA, they can set you up pretty quick.
     
  13. trafficsource

    trafficsource Jr. VIP Jr. VIP Premium Member

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    pretty easy: profits have to be equal for "expenses"
     
  14. reallife

    reallife Jr. VIP Jr. VIP

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    This is exactly the setup I use, I have an LLC and an S-corp, and they both pay the C-corp management fees as "pass throughs" - as others have said, see an accountant for the best suggestions on your situation, though.
     
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  15. Moneyman94

    Moneyman94 Junior Member

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    Just be careful with the CPA you chose. Too many of them have no idea what they are doing when it comes to business. I got screwed my first year with a real winner.
     
  16. Ebcompany

    Ebcompany Registered Member

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    mine is setup as a class s elected LLC....I pay myself a salary, but it varies, its not a set salary....depends on how the income was that month and if the other LLC members want to put more back in for growth or take more out as pay.......I would not worry so much at the moment about the pay "setup" as much as generally making an agreement that once the capital accounts reach X amount of dollars that you will distribute the excess in appropriate amounts to percentage ownership.
     
  17. infoasian

    infoasian Supreme Member

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    Make sure to setup a foreign entity in a tax-free country and pay licensing fee to them.
     
  18. Moneyman94

    Moneyman94 Junior Member

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    I hope the US government doesnt keep cracking down on this.

    Nevada and a few other states have no corp state tax.
     
  19. phracktl

    phracktl Regular Member

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    For companies - among other methods available (income/divs) dont overlook the possibility of paying yourself in the form of a taking a directors loan from your company (dont confuse with taking a loan from a bank against equity...)
     
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  20. BHopkins

    BHopkins Moderator Staff Member Moderator Jr. VIP

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    You should definitely talk to an accountant then come to an agreement about how much you will spend. If your partner wants to stop all marketing to get more income what will you do?

    How will you make business decisions that you don't agree about?