How to Pay Yourself From an LLC

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One of the great benefits of an LLC is its status as a pass-through entity. 

Pass-through entities pass the profits and losses of a business on to the LLC’s members, and if you’re reading this article you either are or will soon be a member of an LLC yourself.

Understanding how to pay yourself from an LLC will ensure you get the most out of the benefits that this particular business structure offers.

In this article, we’ll cover:

  • How LLC payments work
  • What you need to know about different types of LLCs
  • The benefits of payment from an LLC
  • The different payment structures for different positions within an LLC.

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How do I pay myself if I own an LLC?

LLC owners or shareholders are referred to as members, and members are the ones who pay the taxes on the profits and losses of an LLC through their own yearly tax returns. 

Since there are a few different types of LLCs you might own or be a part-owner of, there are different procedures for paying yourself from your LLC’s profits. 

The most important thing to remember is that whatever you pay yourself, you’ll need to pay taxes on as part of your personal returns.

Single-Member LLC owner’s draw

Is the process by which a single-member LLC pays its owner. Although you are the only member of the LLC, the LLC’s profits are not your salary as if you were an employee of the LLC.

Instead, you pay yourself through a single-member LLC process called an owner’s draw. 

An owner’s draw is when you pay your own bank account directly from your LLC’s business account. 

You don’t take your business profits directly into your personal account, so an owner’s draw is how you pay yourself for your own work as the owner of the LLC.

Multi-Member LLC owner’s draw & guaranteed payments

These types of payments are the two ways multi-member LLC members can be paid. 

A multi-member owner’s draw comes from their capital account. Your LLC capital account contains your initial contribution to the business, and you always have access to it.

Your capital account will grow as your business does, and you can withdraw from it as a multi-member owner’s draw.

Similar to a salary, a multi-member LLC can establish guaranteed payments to its members to give them regular payments if company finances permit.

Corporate LLC salaries & profit distribution

Is how LLCs that are registered as S-corps pay their members. 

If the LLC you are a member of is an S-corp, that means it pays corporate taxes and its members can be paid salaries.

Salaried members are W2 employees. Profit distribution is the other method by which corporate LLCs pay their members.

Shareholders can be paid dividends in the same way a corporation’s shareholders are paid. 

Members can also be paid non-dividend profit distributions or a share of the business profits at regularly scheduled intervals.

How do you pay yourself from an LLC?

Apart from the general process that LLCs use to pay their members, there are other specific ways you can be paid from an LLC whether you are a contractor trading as an LLC or you are a member of a single or multi-member LLC.

W-2 employee

If your LLC is an S-corp and pays corporate taxes, then the most likely way you will be paid through an LLC is as a W-2 employee. 

This means you are paid a regular salary and your federal income tax is withheld as with usual employees.

Earn profit distributions

Profit distribution, as we’ve covered above, is the means by which dividends are paid out to shareholders. 

If you are a shareholder of an LLC that is performing well, then you’ll be paid dividends as part of regular profit distributions.

1099 independent contractor

If you are an independent contractor then you may want to form a single-member LLC to operate under for liability protection. 

If this is the case, then you would pay yourself by way of the owner’s draw.

Issuing stock certificates

One way to generate capital is to issue stocks to shareholders on the market.

When traders buy stocks in an LLC, they become shareholders and are therefore due dividends on a regular basis.

Dissolve as a business entity

If you are in a financial bind and need to raise money in a lump sum, you can dissolve your LLC. 

Dissolving an LLC is a distinct legal process unto itself, and is worth investigating further. 

However, if you vote to dissolve your LLC and file articles of dissolution after you have paid your outstanding debts you will be able to distribute assets to members, including yourself, to do with as you please.

Pay as self-employment status

If you run an LLC as a sole member, and you are working as the sole employee of the LLC, you can also use a member’s draw to set up regular payments as salary. 

Remember that these payments are not an actual salary, so you will need to pay taxes on them yourself.

Is it a good idea to pay myself from my LLC?

Now that you understand the ins and outs of paying yourself from your LLC, you might be wondering if it’s a good idea to pay yourself from an LLC. 

Well, you need to pay your personal costs – and the only way anyone who runs an LLC gets money out of their LLC to pay their bills is to pay themselves.

So yes, it’s a good idea to pay yourself from an LLC in some way or another – provided you follow the guidelines we’ve outlined above.


How does an owner’s draws work?

When you start an LLC, each member is given a business account that holds the value of their initial capital and any profits they gain during the course of doing business. 

One of the functions of this account is to enable you to make a direct transfer from it to your personal account. This is an owner’s draw.

Are owner’s draws taxable?

Owner’s draws do not involve automatic federal tax withholding, so you must pay taxes on the amount of money you transfer to yourself on your personal returns.

What is the best way to pay yourself from an LLC?

The best way to pay yourself from an LLC is very much dependent on your business and personal needs.

Depending on your circumstances and the structure of your LLC you will need to determine the correct payment method that works for you.

What are the 4 types of LLCs?

– Single-member LLCs are LLCs with only one owner, hence single-member.
– Multi-member LLCs are LLCs with more than one owner.
– A corporate LLC is an LLC that pays federal taxes as a corporation, instead of acting as a pass-through entity.
– A professional LLC is an LLC made up of accredited professionals, like lawyers, dentists, or doctors.


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Donny is the founder of SMB Guide. He is a seasoned small business owner and entrepreneur, with over 17+ years of experience growing and building companies. He is a well traveled and multi-faceted individual with several successful six figure business exits.