Business Practices

How do I pay myself as an owner of a single-member LLC?

An LLC, or limited liability company, is a lightweight business structure that melds the flexibility of a partnership with the limited liability of a corporation. LLCs are organized under state rules, and for federal purposes, may be treated as a partnership, corporation, or as part of the owner’s personal taxes. While it doesn’t have the typical tax savings other business entities do, it’s a lot less confusing.

A single owner of an LLC is not considered an employee, and therefore doesn’t receive any wages. Instead, they can receive a distribution, which is reported as part of their personal income tax return. Owners are subject to tax on the net earnings of the LLC, which is treated in the same way as a sole prop.

Sometimes, an LLC may elect to be treated as a corporation for tax purposes. When that happens, you may be considered and employee and receive wages, rather than a distribution. That distinction can get thorny, so be sure to check with your tax advisor to see how your specific LLC is treated.

This article provides general information and shouldn’t be construed as tax, benefits, legal, or HR advice. Rules and regulations may change over time and may vary by location. So, please consult an appropriately certified expert (such as a lawyer, CPA, tax advisor, licensed broker, or HR expert) for advice specific to your circumstances.