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How to pay myself through business LLC

Discussion in 'Business & Tax Advice' started by eponus, Feb 1, 2011.

  1. eponus

    eponus Registered Member

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    I have a one man business LLC in the United States with a separate business bank account than my personal accounts. Anything business related I purchase using my business account, which nicely separates my business and personal expenses.

    However, I have no idea how I'm supposed to pay myself from the business account to the personal account. I don't make steady money yet so I can't give myself a "salary". I also don't know how to record this from a bookkeeping point of view. Any ideas would be much appreciated, especially links where I can read up on this stuff!
     
  2. zrammbo

    zrammbo Newbie

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    Maybe you should consider hiring an accountant, a while ago I use to use Quicken for keeping track of my expenses.
     
  3. BorisTipsIt

    BorisTipsIt Regular Member

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    You can hire a bookkeeper to do the books. A bit cheaper. You can also use quicken online if you can figure it out. Pretty simple.

    As to paying yourself, you just write a check. A single member LLC is a disregarded entity by the IRS [assuming you are in the US.] This means the IRS essentially considers you to be a sole proprietor. Just write yourself checks when necessary, but make sure to pay some money into the IRS and your state every so often so you don't get hammered at the end of the year.
     
  4. nickthepick

    nickthepick Newbie

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    I say hire an accountant
     
  5. -Jericho-

    -Jericho- Jr. Executive VIP Jr. VIP Premium Member

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    This should help you out:

    Code:
    http://www.allbusiness.com/accounting-reporting/corporate-taxes-limited/1288-1.html
     
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  6. DamnTees

    DamnTees Junior Member

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    How my LLC works is business related expenses are taken from the gross income and the rest is available for wages. In my business I split it based upon the shares of the partners 50/50. An LLC is a flow through corporation so what you pay taxes on is the revenue you take from the company.
     
  7. iiaok

    iiaok Regular Member

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    Seriously...consult an accountant. Don't put yourself at risk by following random people behind a computer screen.
     
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  8. Jorod

    Jorod BANNED BANNED

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    If your limited liability company (LLC) has more than one owner, you can choose to have the company taxed as either a corporation or a partnership. In the case of a single owner of an LLC, you can choose to have the company taxed as either a corporation or a sole proprietorship.
    Because income flows through to you, from a tax standpoint, you've chosen to have your LLC taxed as a sole proprietorship (if you're the only owner) or as a partnership (if there's more than one owner). This is usually what most small business owners want. As you note, any profits flow through to your personal income taxes and you pay personal income tax on any net earnings of your business. So when you withdraw money from your LLC, it's a personal draw of funds that have been previously taxed. The actual withdrawal of funds for personal use is not a taxable event. The money was taxed when it was earned.
    On the flip side, sole proprietors and partners may be liable for self-employment tax, which is the equivalent of Social Security tax that employees pay. (See IRS Publication 533 for more information about self-employment taxes.) There is a self-employment tax deduction which says that you may deduct one-half of your self-employment taxes from your personal income taxes, which will slightly reduce your income taxes. But, as a sole proprietor, usually any net earnings are subject to this self-employment tax, which currently runs about 15%.
    If you're a sole proprietor, it's entirely up to you how much profit you remove from your business and spend on personal items. You and your company are considered the same economic entity. If you're in a partnership, the situation is more complex, because one partner might not like seeing the other partner raid the partnership piggybank. In partnerships and LLCs with multiple owners (and especially investors), how profits are allocated is set by the articles of organization.
    So, the answer to your question in terms of what's best with regard to taxes is that it doesn't really matter. Your tax situation was determined when you determined your business structure. You will pay taxes as a sole proprietor (or a partner) on your net profits.
     
  9. Jorod

    Jorod BANNED BANNED

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    nevermind...
     
    Last edited: Feb 16, 2011
  10. TheTRUTH

    TheTRUTH Regular Member

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    From a bookeppign standpoint you would write yourself a check(lets say for $100)

    Subtract $100 from your cash account, and then subtract 100 from the dividends account
     
  11. Profector

    Profector Newbie

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    I have seen some good advice given to you here, but take it
    from someone who learned a lesson the hard way. Consult an
    accountant. There are some that will even give you a free
    consultation. It will be fruitful in the the long run.
     
  12. Lifesahustle

    Lifesahustle Newbie

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    Id consult an accountant my friend.. Its your best bet. I doubt too many people here are that knowledgeable about this subject. Look around online at other business related forums if you dont have the fees to pay someone. Use your resources wisely. Just my opinion.
     
  13. Shaw33

    Shaw33 Newbie

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    Yes, an accountant is best..............then you can hear it from the professional's mouth. Once they give you the plan...........then simply follow it.
     
  14. zellow1006

    zellow1006 Junior Member

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    my mother is an accountant, and her husband owns his own business. she keeps track of all his net earnings, and hires a checking company to make and design the checks for their business bank account. every 2 weeks she reports to the checking company how much they made and they send him a check in the mail to cash. its basically like a real company, they even get w-2's created at the end of the year and have to fill out a bunch of other tax forms for their business.

    obviously this is convenient because they are married, but you get the idea.
     
  15. Michaelh76

    Michaelh76 Newbie

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    If it is just you taking Money it is a simple Process - you can write yourself a Check. Remember that you are responsible for Fica/Futa and other quarterly reports and payments.

    Search on irs 941 for explanation of what you have to file Quarterly and the required Tax Deposits.

    Generally, you will file Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return, to report wages you have paid, tips your employees have reported to you, federal income tax withheld, social security and Medicare taxes withheld, your share of social security and Medicare taxes, and advance earned income credit payments. Form 944 may be filed only by small business employers who have been notified to file that form. To report wages and taxes for farm employees, you will file Form 943, Employer's Annual Tax Return for Agricultural Employees.
     
  16. sseccajd

    sseccajd Newbie

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    how is this ONLY conveniant because they are married. A W2 is beneficial if your married or not, correct me if i'm wrong but this post by you is probably ythe best answer on here, with W2's you don't have to pay the self employment tax and what not... can someone confirm this?

    What are some good checking companies to do this with?
     
  17. kypso

    kypso Junior Member

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    Even with the W2 you will pay the self-employment tax, only via S-Corporation you can do that.

    K.
     
  18. sseccajd

    sseccajd Newbie

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    Thanks, yea I just opened one up myself ;)
     
  19. clpride

    clpride Registered Member

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    As a single owner, it's treated almost like a sole proprietorship. Any income should be reported on your income tax. Double check with you state and seek legal counsel to confirm though.
     
  20. eimFlood

    eimFlood Junior Member

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    ^^^ What he said, but make sure that you elected to be treated as a disregarded entity. People usually choose to keep single-member LLCs as disregarded entities, but it's possible to be taxed as a corporation, too. It all depends on how you set it up. Get an accountant. For the day to day stuff, you might like GnuCash.