Taxing profits from a LLC that have already been taxed

I have a lot of cash in my LLC. I have been paying taxes on the profits for years via a regular payroll so the money in my LLC has been taxed once. Now I have accumulated a lot of captial in my company. This capital has been left over after paying taxes on the profit via my 1040 every year. How do I draw out these profits without paying tax again?. If I take it out as payroll then I have to pay payroll taxes again.

Answer

It depends on how your LLC is taxed: as a partnership, corporation or disregarded entity.

If your LLC is taxed as a partnership or disregarded entity, then you pay taxes on your LLC's entire profit each year, regardless of how much you payout to yourself in draws and distributions.

If your LLC is taxed as a corporation, then the LLC will pay taxes itself each year, and then, when you take a dividend, you will report those dividends on your personal return as well (just as if you received a dividend from a stock).