Paying yourself from an LLC usually means moving a few thousand dollars from the business account across to your own. Maybe you do it the week rent is due. What you want to know is whether that counts, and whether it will cause you trouble.
It counts, and for most owners it is the right way. How to pay yourself from an LLC comes down to one thing: how your LLC is taxed. Most LLCs are taxed the simple way: you move the money across and nothing is taken out of it for tax. That payment has a name, an owner's draw. Ask the IRS to tax your company as a corporation instead, and you go on the payroll like anybody else who works there.
If you keep moving money across without setting any of it aside, it costs you twice. You can reach April owing tax on money you already spent. And under Florida law, a payment taken when the business could not cover its bills can be collected back off you personally for two years.
This one is written for somebody doing it for the first time, in the order the questions come up. By the end you will know which kind of LLC you have, what to set up first, how to take the money, what you will owe on it, what can go wrong, and when becoming an S corp is worth it. Keeping the company in good standing is a different job.
I am Dr. Michael Wendrow. I have run a chiropractic office in North Miami for more than 30 years, and I started Prime Time Business Network in 2012.
Key takeaways
- Most LLC owners pay themselves with an owner's draw, a transfer out of the business account with nothing taken out of it. The tax arrives later, on your own return.
- An LLC that asked the IRS to tax it as a corporation cannot pay its owner that way. You go on the payroll of your own company, and the wage has to be believable for the work you do.
- You owe self-employment tax of 15.3% on what your LLC earns, whether or not you ever moved that profit into your own account.
- Florida lets a payment be collected back off you personally for two years, if the business could not pay its bills once the money was gone.
Step one: how to pay yourself from an LLC depends on which kind you have
Start here, because everything after it follows. There are three kinds, and you already belong to one. It was settled the day you set the company up, or the day you asked the IRS for something different.
How you pay yourself is set by how your LLC is taxed, not by what you call the payment. Two of the three kinds use an owner's draw. The third puts you on payroll.
- One owner who never asked the IRS for anything different: it calls your LLC a disregarded entity, meaning it ignores the company and taxes you instead. You take an owner's draw and report the profit on Schedule C, the business page of your own return.
- Two or more owners who never asked either: the LLC is taxed as a partnership. Everybody takes a draw. The LLC files Form 1065, which is the return that reports the year's income without the company paying any tax on it, and hands each owner a Schedule K-1 showing their share.
- Either of those once you have asked the IRS to tax you as an S corp or a C corp, a request it calls an election: you can no longer just move money across. You become an employee of your own company and pay yourself a wage with tax taken out.
Where that comes from: the IRS pages on single member LLCs and paying a shareholder who works in the business.
If you have never sent the IRS a form about this, you are in the first or second kind, which is where almost everybody reading this sits. LLC distributions and an owner's draw are the same money under two names.
Step two: three things to have ready before you move a dollar
Nothing here gets filed with anybody. This is housekeeping, and doing it first keeps everything after it simple.
- A bank account in the company's name. Pay business costs out of that one and personal costs out of yours. Once the two are mixed, nobody can tell a payment to yourself from a grocery run.
- A way to see what the business actually made. You are taxed on profit, so you need to know roughly what the profit is. A spreadsheet is enough at the start. Guessing is not.
- A second account to park tax money in. Nothing is taken out of a draw, so the tax is still sitting there looking spendable. Move it somewhere you will not touch by accident.
Now you know what to have ready. The next question is the one everybody asks out loud: how do I actually do it?
Step three: paying yourself, step by step
A draw is three steps, and every one is something you do rather than file. Here is the order I give people.
- Decide the amount. There is no minimum and no schedule. Look at what the business holds, take off what it owes over the next month or two, and your draw comes out of what is left.
- Move it, and leave a record. Use a bank transfer or a business check, so there is a record of the date and the amount. Cash leaves nothing behind.
- Record it as a draw, not as an expense. A draw comes out of your share of the company, so it never lowers the profit the business reports. File it under wages or supplies and you understate what you earned, which is the error that turns into an amended return.
Paying yourself is that simple. The part that catches first-year owners happens next, at tax time.
Step four: what you will owe on the money, and when
Tax time surprises people most, and it has nothing to do with how much you drew. You owe tax on the LLC's profit for the year, not on the money you moved. Leave $40,000 in the business account and draw nothing, and you are still taxed on $40,000.
On top of income tax there is self-employment tax, which is how somebody with no employer pays into Social Security and Medicare. The IRS puts the rate at 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare. The Social Security half stops once your earnings pass the 2026 limit of $184,500. The Medicare half never stops. Half of what you pay comes back as a deduction, so the real bite is smaller than the headline rate. Florida adds nothing on top, because there is no state income tax here.
Nobody sends you a bill for any of that during the year, which is why the second account in step two matters. What you owe instead is estimated tax, which is what LLC quarterly taxes means. You send it four times a year, once you expect to owe $1,000 or more when you file. The one covering September through December is due January 15 of the following year. That makes Friday, January 15, 2027 the next date to put in your calendar. Pay 90% of this year's tax or 100% of last year's, whichever is smaller, and no penalty follows.
So far this is all federal arithmetic, and all of it is about what you owe. The part that surprises owners is a Florida rule about what you are allowed to take in the first place.
Step five: what can go wrong, and the money Florida will not let you take
How much to pay yourself is the next question, and every other page on this topic answers it the same way: take what you like, just leave enough to operate. In Florida that is law, not advice.
Section 605.0405 of the Florida Statutes sets two tests, and your LLC may not make a distribution if either one fails once the money is gone. The company has to be able to pay its debts as they come due in the ordinary course of business. And its total assets have to be worth at least as much as its total liabilities. A distribution is the legal word for the money we have been calling a draw.
Break that rule and the money follows you home. Section 605.0406 makes the member who agreed to the payment personally liable for the amount the company should not have paid out. Somebody who took the money knowing it broke the rule is liable too, and in a one-owner LLC that is you twice over. A claim has to start within two years of the payment, and after that it is barred.
What gets an owner caught is the order they do things in. Florida asks members to stay clear of reckless or grossly negligent conduct, and a big draw taken without checking what the company owes reads badly in front of an unpaid supplier.
The fix takes a few minutes, and it is step one all over again. Before a large draw, list what the business owes over the next month or two, sales tax and payroll money included, and draw out of what is left.
Now you know what is safe to take as the only owner. A second owner changes the question, and Florida has a rule for that too.
If you have a partner, Florida decides the split when your agreement is silent
Ask two owners how they split the money and you hear a percentage. Ask where it is written down and the room goes quiet. Section 605.0404 fills that silence, and it says neither equal shares nor ownership percentage. Distributions are shared on the basis of the agreed value of what each owner put in, as stated in the company's own records. And only as far as the company actually received it.
The default split matters most if you came in as the partner with the idea rather than the cash. Say your records show one owner putting in $80,000 and you putting in a laptop. The split follows those numbers, however the work has divided since. You can override that with an operating agreement, which is the written deal between the owners about who gets what.
Partners also get a second way to be paid that a solo owner does not. Guaranteed payments are fixed amounts to one owner for the work they do, paid whether or not the business made a profit. They come off the top before anything is divided, which is how the partner running the shop gets paid for it.
Later on: when becoming an S corp is worth it
Leave this one alone until the business is making real money. Once the profit gets big enough, an accountant or another owner will tell you to become an S corp to save on self-employment tax. The answer is a split: part wage, part distribution. S corp salary vs distribution carries the whole saving, because a wage takes payroll tax and a distribution does not.
S corp reasonable compensation is the test, and the IRS applies it by asking where the company's money came from. Profit earned by your own hands has to reach you as a wage. Profit earned by your employees, or by your equipment and cash, can be a distribution. A one-person consultancy has almost no room here. A business with six employees has plenty.
Two costs come with it and neither shows up in the pitch. You now run payroll, which means filing every quarter and registering for Florida reemployment tax on your own wages. And asking to be taxed as a C corp instead brings the state in: Florida charges 5.5% corporate income tax on an LLC taxed as a corporation, after a $50,000 exemption. A one-owner LLC on the simple treatment files no state return at all.
The S corp election deadline is the part worth acting on today. You make it on Form 2553, which is the form that tells the IRS to tax your LLC as an S corp. The instructions give you two windows. One is any time during the year before the one it takes effect. The other is no more than two months and fifteen days into that year. For a 2027 change that means now, or by Monday, March 15, 2027. Filing it in 2026 is cleaner: you can set payroll up before January instead of backdating a wage you never paid.
Common questions about paying yourself from an LLC
Can I deduct what I pay myself? Not if it is a draw. A draw is your own money leaving the company, so it changes nothing about the profit the business reports. A wage paid once you are taxed as a corporation is a real payroll cost, it lowers what the company reports, and it reaches you on a Form W-2, which is the wage statement an employer hands you each January.
Do I need an EIN to pay myself? An EIN is a tax number for a business, the company's equivalent of a Social Security number. A one-owner LLC generally uses the owner's own number for income tax, but once anybody is on payroll, yourself included, it needs the EIN.
Do I have to pay myself the same amount every month? With a draw, no. Nothing requires a schedule, and most owners take more in good months. You can take $500 in March and $9,000 in July. On payroll it flips: a wage is meant to look like a wage, so pick a pay period and keep to it.
What a room of owners gets you on a question like this
We built Prime Time Business Network so an owner never has to guess at what another member answers for a living. We run fifteen chapters across Miami-Dade, Broward and Palm Beach, and every chapter seats one business per category, so the accountant in our room holds that seat alone. Your question gets an answer, not a sales call.
Chapters meet every two weeks, in person and on video, so a year-end question does not wait for the year to end. The owners beside you file the same Florida paperwork you do, from the fictitious name registration to the annual resale certificate.
Not sure what you can safely take out this year?
If you would rather work that out alongside owners who file the same forms and keep the same dates you do, find the chapter that fits your business category and ask Mark Hirsch whether that seat is open.