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How do I pay myself?

I own a small business (single owner LLC) and I am the only "employee". Last year, for some months, I ran payroll (for a few months) to pay myself and had to pay payroll taxes, unemployment taxes, etc. to the State of Tennessee. Most of last year and so far this year, I have just taken distribution checks from the company. I'd like to be on a regular payroll so I keep up with income taxes, but do I really need to be paying payroll taxes if it is just me I am paying?

How do people in similar situations pay themselves? Thanks in advance!

Smallbusiness | 👁 417 | Posted 2018-03-07 | Share on Facebook | Twitter | Google+

| Modified: 2018-03-07 | Author:

16 Comments

xaviishere 1 year ago

Pay yourself a fair amount in payroll and then ask your accountant about the reimbursable expenses. Ex. Gas, home office, out of pocket expenses on behalf of entity. Many ways to save on taxes.

IncredibleMark 1 year ago

Talk to your accountant, not paying the government the right taxes is the a quick way to lose a business, just be sure to ask him is his fee is tax deductible.

SqueakyCheeseCurds 1 year ago

Be careful if you move to a new state. I moved to IL mid-year and it turned out that they require anyone who would have to pay more than 500 or 1000 in taxes in an annual payment to actually be paid quarterly. I was not happy to find a ~$90 penalty mailing from the state a few months later.

abhive 1 year ago

Thank you! How is your company set up? LLC or? (I agree on the new rule)

SlytherinF1 1 year ago

I pay myself a regular salary every two weeks through a payroll company. We have 18 employees now but even when I had two I used a payroll company. I never wanted to get in trouble not paying enough in unemployment or federal or state etc. I also take quarterly draws and a bonus at the end of the year. My banker recently told me I needed to pay myself more though, not for tax reasons but because my wife and I are wanting to buy a home and they want to see a bigger income on paper. So keep that in mind I guess for down the road. On an unrelated note, Im all for a new rule stating the answer cant be just google it or some such.

MasterofGrowth 1 year ago

Yes same. This seems like the simplest way to handle paying taxes.

flamingo-tax 1 year ago

LLC is a disregarded entity for the IRS. (Assuming no S-Corp). You pay taxes on the net income of the LLC regardless of whether or not you leave it in the LLCs bank account or your own. (Including self employment tax with your 1040).

osugunner 1 year ago

I pay myself with guaranteed payments, basically like a salary but different for tax purposes. It's a bit more flexible, you'll make quarterly payments for your taxes instead of on each paycheck. Also instead of your FICA, you pay self-employment tax.

beley 1 year ago

The payroll and reasonable salary requirements are only for LLCs with an S-corp election. For regular LLCs, you're actually NOT supposed to pay owners via payroll. It's supposed to be a distribution.

abhive 1 year ago

Solid points. Didn't think about SS at retirement. Thanks.

drnick5 1 year ago

I take a normal salary, paid every 2 weeks. This has your normal payroll taxes taken out. Every quarter, I also take a "partner draw", and also take one at the end of the year depending on how we did. If you only pay yourself using a draw, it can be a problem if you ever get audited. (I'm not a tax guy, but I think if you only take draws, and no salary, you pay additional self employment taxes at tax time) per the IRS, you need to pay yourself a "reasonable salary". If you don't, then you are getting around paying FICA taxes (Social security and medicare). Not to mention, come retirement age, you may not have enough credits in social security to collect if you didn't work a "normal job' before starting your business.

Plus_EeeVee 1 year ago

I was told to take partner draws... I just pay all taxes end of year.

abhive 1 year ago

What's a google? Of course I did. And there are multiple ways of going about it so just trying to see what my cohorts are doing. Thanks for your help.

rollerblagel 1 year ago

...did you Google this? There are 18 million articles out there about this exact issue. The IRS cares a lot about this so you should make sure you're doing it right, probably by consulting with an accountant.

abhive 1 year ago

When you say taxes, does it include payroll, unemployment, federal and state?

BillatOnlyFounders 1 year ago

I just give myself a "partner draw" and pay taxes quarterly.


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