Q: How do I pay myself as an owner of a multiple-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.

In an LLC, all profits and losses are passed from the business to each member. Members report profits and losses on their personal federal tax returns, just like the owners of a partnership would. If an LLC has at least two members, it is generally classified as a partnership. Therefore, members can pay themselves by taking a distribution of their portion of the profits. This amount is reported as part of the Schedule K-1. You’ll need to pay taxes on this amount on your personal income tax returns.

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

Comments

  • Glynis Carpenter

    So how does this work within Gusto’s set-up?

    Reply
    • Gusto Editors

      Hi Glynis — we see you are currently a Gusto customer, and we recommend you reach out to our support team via the Help tab in your Gusto account. Our Talk Shop blog is for all small businesses, regardless of whether or not they use Gusto. You’ll get the Gusto-specific answers you need by getting in touch with our team!

      Reply

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