How to Pay Yourself from an LLC: The Complete 2025 Guide

Remember that exciting moment when you landed your first big client or made your first sale? You were probably focused on growing your business, not thinking about the mechanics of paying yourself. But now that money's flowing into your LLC's bank account, you're wondering how to actually get that money into your own pocket.

It's not as complicated as it seems. The way you'll pay yourself depends on your LLC's setup: Whether you're flying solo, have business partners, or have opted for S corporation status. We'll walk through your options so you can pay yourself correctly and keep the IRS happy.
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TL;DR: How do owners pay themselves in an LLC?

When it comes to paying yourself from your LLC, there’s no one-size-fits-all solution. Your payment method depends entirely on how your LLC is set up. LLC members have different options for paying themselves, each with its own tax implications. Here are your three main options:

1. Owner’s draw: This is the most common method for single-member LLCs. You simply draw money from the business profits as needed.
2. Guaranteed payments: This method is often used in multi-member LLCs. Members receive a fixed payment regardless of the business’s profitability.
3. Salary: If your LLC is taxed as an S Corporation, you can pay yourself a salary. This means you need to withhold payroll taxes and comply with employment tax regulations.

Paying yourself in a single-member LLC

If you're running your LLC solo, this is probably your setup. You're not considered an employee, instead, you simply transfer profits from your business account to your personal account through what's called an owner's draw.

Since you're not an employee, you won't have any payroll taxes withheld from these transfers. Instead, you'll pay self-employment tax and income tax on all your profits. 

At tax time, you'll report everything on Schedule C with your personal return. The IRS sees your business profits as your personal income automatically, you just need to move the money from one account to another.

Paying yourself in a multi-member LLC

In a multi-member LLC, you can pay yourself in two ways: Profit distributions and guaranteed payments. Your profit distributions come from your ownership percentage (if you own 60% of the LLC, you get 60% of the profits). Guaranteed payments work like a salary for the work you do, regardless of profitability.

Multi-member LLCs are often treated as partnerships for tax purposes, and members report their share of partnership income on their own personal tax returns.

Simply transfer these payments from your business account to your personal account. Since you're not an employee, you'll need to handle taxes yourself through quarterly estimated payments. At year-end, you'll get a Schedule K-1 showing both types of income for your tax return.

Paying yourself in an LLC taxed as an S Corporation

If your LLC is taxed as an S Corporation, you must pay yourself a reasonable salary as a W-2 employee. This means running payroll and withholding taxes. 

Beyond your salary, you can take additional profit distributions that aren't subject to self-employment tax, a potential tax advantage. Your income shows up on two forms: Your W-2 for salary and Schedule E for distributions.

Can a single-member LLC pay themselves a salary?

Technically, you can't pay yourself a traditional salary from a single-member LLC unless you've elected to be taxed as an S Corporation (more on that in a minute).

The IRS already considers you and your single-member LLC to be one and the same for tax purposes. You're not an employee, you're the owner. That means all the profits flowing through your business are automatically considered your personal income.

So how do you actually get paid?

You take what's called an "owner's draw." Think of it like reaching into your business cookie jar and taking out some cookies. Except, in this case, it's transferring money from your business account to your personal account. Just make sure to:

• Label these transfers clearly as "Owner's Draw" in your books.
• Keep detailed records of when and how much you take.
• Set aside roughly 25% to 30% for taxes (you'll thank yourself later).

But what about S Corp status?

If you're making decent money (usually $80,000+ annually), you might want to consider electing S Corporation status. This is where you can—and must—pay yourself a reasonable salary. The benefit is that any additional profit distributions beyond your salary aren't subject to self-employment tax, which could save you thousands.

A quick note about payroll software

Even if you're using payroll software like Gusto or QuickBooks, remember: Don't set yourself up as a W-2 employee unless you've elected S Corp status. Instead, use your accounting software's "owner's draw" or "equity distribution" feature to track your payments. This keeps everything clean for tax time and makes your accountant's job easier.

How do I pay myself from a multi-member LLC?

Running a business with partners adds some wrinkles to how you get paid. Let's break down your two main options: Guaranteed payments and profit distributions.

Guaranteed payments: Your "salary" alternative.

Think of guaranteed payments as your compensation for showing up and doing the work. Maybe you're the one managing day-to-day operations, or you're bringing in most of the clients. Guaranteed payments ensure you get paid for your effort, regardless of whether the business is profitable that month.

These payments:

• Are similar to a salary (but you're still not an employee).
• Get paid before profits are distributed.
• Are tax-deductible for the LLC.
• Must be reported as self-employment income (meaning you'll owe self-employment tax).

Profit distributions: Your share of the pie.

This is where your ownership percentage comes into play. If you own 40% of the LLC, you're entitled to 40% of the distributed profits. A few important notes about distributions:

• They're based on your operating agreement.
• Usually happen quarterly or monthly.
• Aren't guaranteed (hence the name "profit" distributions).
• Partners can agree to reinvest profits instead of distributing them.

How to handle the money and taxes

Here's the practical stuff you need to know:

• Set up regular transfers from your business account to your personal account.
• Keep meticulous records of both guaranteed payments and distributions.
• Plan for quarterly estimated tax payments (no one's withholding taxes for you).
• Expect a Schedule K-1 at tax time showing both types of income.

Pro tip: Work with your partners to create a written payment schedule. Having clear expectations about when and how much everyone gets paid can prevent a lot of headaches down the road.

What is the most tax-efficient way to pay yourself in an LLC?

It depends entirely on your LLC's profits. If you're making less than $80,000 annually, stick with the default owner's draw setup. The administrative costs of other options usually outweigh the benefits.

But once you're consistently clearing that $80,000 mark, electing S Corporation status typically makes the most sense. You can pay yourself a reasonable salary (which is subject to self-employment tax) and take the rest as distributions (which aren't), potentially saving thousands in taxes. 

Just remember that "reasonable" is the key word. The IRS pays close attention to suspiciously low salaries paired with large distributions.

What taxes do I pay when I pay myself from my LLC?

Taxes are probably the least fun part of running your business. For most LLC owners, you're looking at two main tax bills: self-employment tax (that's 15.3% for Social Security and Medicare) and regular income tax on everything you earn. Since you're wearing both hats, you're paying both the employer and employee portions of these taxes.

Plan to set aside about 30-35% of everything you earn for taxes. Yes, it sounds like a lot, but it's better to over prepare than get surprised with a huge tax bill in April. Make those quarterly estimated tax payments (due in April, June, September, and January) to avoid penalties. 

And here's a pro tip: keep a separate savings account just for taxes. You'll thank yourself later.

How do I physically pay myself from my LLC bank account?

The mechanics of paying yourself are straightforward, just transfer money from your business account to your personal account. You can do this through an ACH transfer, writing yourself a check, or using your bank's online transfer system. 

The key is consistency and clear documentation. Label every transfer as either "Owner's Draw" or "Distribution" in your accounting software.

Most business owners set up a regular payment schedule, like the 1st and 15th of each month, and automate these transfers through their bank or accounting software like QuickBooks. Whatever method you choose, keep it separate from personal expenses. No using the business debit card for personal purchases, even if you plan to "pay it back later."

What percentage should I pay myself from my LLC?

There's no magic percentage. It depends entirely on your business's cash flow and growth goals. A good starting point is the 50/30/20 rule: 

• 50% for operating expenses (including taxes)
• 30% for owner's pay
• 20% for reinvesting in growth 

But these numbers can shift based on your industry and stage of business.

For example, if you're bringing in $10,000 monthly: 

• Set aside $5,000 for expenses and taxes 
• Pay yourself $3,000 
• Keep $2,000 for business growth or your rainy-day fund 

As your business becomes more stable, you can gradually increase your percentage. Always keep enough cash in the business to cover at least three months of expenses.

How do I report LLC income on my personal taxes?

Tax reporting varies based on how your LLC is structured. With a single-member LLC, just report all your business income and expenses on Schedule C of your personal tax return. The IRS treats your business as an extension of yourself, so everything flows through to your 1040.

Multi-member LLCs and S Corps are a bit different: 

• In a multi-member LLC, you'll receive a Schedule K-1 showing your share of profits and losses. 
• For S Corps, you'll get both a W-2 for your salary and a K-1 for any additional distributions. 

Keep these forms handy. Your tax software or accountant will need them to properly report your business income.

What happens if an LLC makes no money?

Starting or running a business during lean times doesn't mean you can't pay yourself anything. But it does mean you need to be strategic. If your LLC isn't profitable, any money you take out is considered a draw against your ownership equity or a loan to yourself. While this is legal, it's not sustainable and could create tax complications.

Your best move during unprofitable periods is to minimize personal draws and focus on building revenue. Document any money you put into the business as a capital contribution. This creates a clear paper trail for when your business becomes profitable again and helps prevent tax headaches. 

Consider picking up consulting work or other income sources to cover your personal expenses until your LLC gets back on track.

Start paying yourself from an LLC the right way

Now you know the basics: 

• Single-member LLCs take owner's draws
• Multi-member LLCs use guaranteed payments and distributions
• S Corps balance salary with distributions 

Start with a clear payment structure based on your LLC type, keep detailed records, and always set aside money for taxes.

Remember to run major financial decisions by your accountant, especially if you're considering switching to S Corp status. And no matter which payment method you choose, maintain strict separation between business and personal finances. Your future self (and your accountant) will thank you.

Need help tracking employee wages and running payroll once your LLC starts growing? Homebase's free payroll tools help small business owners manage timesheets, payments, and tax documents all in one place. Get started for free.
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