How to Pay Yourself When You Own An LLC

"How do I--me, not my company--actually get paid when I operate an LLC?"
That's a fairly common question that's heard from new business owners--particularly those who have been employees all their lives before. They don't understand the mechanics of getting the money from their company to their personal account so they can actually spend it.


Rule #1 -- Don't write checks for your personal expenses out of your business account.

This is a very quick way to get into trouble with the IRS and have your corporate veil pierced. All checks written on your business checking account should be for business expenses. All charges on your business credit card should be for business expenses as well.

How To Get Paid -- Single Member LLCs

If you have a single member LLC, the mechanics of paying yourself are simple. Fortunately, you won't need to create a payroll system just for yourself with the whole alphabet-soup of government agencies taking little (and not so little) chunks out of your paycheck. Instead, you simply write a check from your business account to your personal account.
The process simply is this:
  1. Receive check from customer.
  2. Deposit check in business checking account.
  3. Pay business expenses from business checking account.
  4. Write check from business account to your personal account.
  5. Spend your money!
Follow these steps and you ensure that you're not commingling business and personal funds. This is important because a big reason for forming a limited liability company is to limit your personal exposure to business debts. To mix business and personal funds defeats this purpose and exposes your personal assets to business creditors.
The cost is minimal. Basically, it's the cost of having a separate business checking account. If you carry a big enough balance in your business account, you can probably avoid bank fees altogether. Another way to reduce bank fees is to use the same bank for your business as your personal banking.
Incorporate Your Business For Free
comments powered by Disqus