Owner’s Draw for Small Business

One of the most popular questions small business owners have is how do I pay myself?


Most small business owners operating as a LLC are allowed to take what is called a "DRAW". This means that as the owner of the business you can take lumpsums of money from the business at any given time. All you would need to do is write a check from your business account to your personal account.


Some small businesses are operating as single member entities (one person running the show and one person performing the work). In this event there is no requirement for payroll and there is not IRS law that requires you to run payroll. Single member LLC's are considered PASS-THROUGH entities; meaning that all profits and loss pass through to the owner and the income from the business if filed on the owners personal tax return via form Schedule C Net Profit and Loss. Unless you have filed the proper documents with the IRS electing to be taxed as a corporation; form 2553 your taxes for the business will be paid at the time you file your personal tax return.

 

BY IRS DEFAULT ALL SINGLE MEMBER LLC'S ARE CONSIDERED DISREGARDED ENTITIES AND THUS TAXED THROUGH THE OWNERS PERSONAL TAX RETURN. IN THIS EVENT THE OWNERS DRAW IS NOT SUBJECT TO PAYROLL TAX OR PAYROLL DEDUCTION.

 


So pay yourself through owners draw! Remember you and your business are one in the same for tax purposes. The more you DRAW the less your will have to operate your business. Take what reasonable and fair.



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