As an LLC owner, you can get paid through an owner’s draw, profit-sharing distributions, or guaranteed payments. For multi-member LLCs, draws and distributions are divided among the partners. If the LLC is taxed as a corporation, you also have to take a salary.
Payment Methods for LLC Members
To learn more, check our guide on estimated taxes for small businesses. Multi-member LLC payment rules vary depending on partnership or corporation designation. Partnership LLCs allow owners to take earnings as draws, similar to single-member LLCs. However, partnership LLCs are “pass-through” entities, so owners must report all distributions of profits and losses.
LLC owners may also owe self-employment taxes on their share of net income, unlike employees. LLCs offer flexibility in legal IRS designation. Single-member LLCs are taxed as sole proprietorships. Multi-member LLCs default as partnerships but can elect corporation status.
Tax Implications of an Owner’s Draw
To determine the best payment method, check with a qualified tax professional or accountant based on your LLC structure. They can ensure compliance with tax regulations.