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Do I Have To Pay Myself In An LLC? November 14, 2009

Posted by Julie Duriga, CPA in Uncategorized.

Windpower old and newOf course, any good CPA would start with a disclaimer that this blog post is not intended to render legal or accounting advice…my hope is to get you started with some general knowledge…

To be straightforward and to the point…yes, you should absolutely pay yourself in an LLC if you are registered with the IRS as an S Corporation.  The payroll rules for LLCs filing as an S Corporation are very clear and state that you are an employee of your S Corporation even if you are the only employee of the S Corporation.  The IRS doesn’t understand why someone would stay in business for more than three years if you are not making any money.  Repeated losses year after year increases your audit risk.  Payroll in almost every state requires that you pay unemployment insurance and state withholding taxes.  An LLC filing as an S Corporation should run payroll at least once a quarter and submit some funds to the IRS and to state agencies even if the amounts are nominal.

For LLCs filing as a sole proprietorship or as a partnership…your status requires that you take draws and that you make your estimated payments to the IRS for your social security and medicare.  See last week’s blog on paying yourself inside a sole proprietorship.  The rules are similar for a partnership!

It is absolutely critical that you know without a doubt your filing status with the IRS.    There is no federal tax form for the LLC.  When you filed for your Employer’s Identification Number, you elected your filing status or if your attorney filed your paperwork for you, ask your attorney what you are filing with under the LLC.

This seems really complicated but if you spend a little time with this, you will understand!  Have no fear!  Spend some time digesting and pondering this information and it will begin to make sense to you, even if it doesn’t right now, it will eventually!



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