How to Pay Yourself From an LLC

How you pay yourself from an LLC depends on how the LLC is taxed. A single-member LLC taxed by default pays you through owner's draws, a multi-member LLC pays partners through guaranteed payments and distributions, and only an LLC taxed as an S corp or C corp can put you on payroll with a W-2 salary. In every pass-through case, you owe tax on the year's profit, including any you leave in the business.

How is my LLC taxed?

Unless you filed an election, a one-member LLC is taxed as a sole proprietorship (a "disregarded entity") and a two-or-more-member LLC is taxed as a partnership. Either kind can instead file Form 8832 to be taxed as a corporation, or file Form 2553 to be taxed as an S corp without also filing Form 8832.

How do I pay myself from a single-member LLC?

You transfer money from the business account to your personal account and record it as an owner's draw. There is no payroll, withholding, or W-2: a disregarded LLC "is not the employer of its owner", and you can't deduct your own salary or personal withdrawals. For how draws compare with a salary, see owner's draw vs. salary.

1. Move what the business can spare, after bills and a tax reserve, from the business account to your personal account. The IRS suggests writing checks to yourself only for personal withdrawals and recording where deposits came from.
2. Record it in your books as a draw, not an expense.
3. Pay personal bills from your personal account, never the business one. Mixing the two can weaken your liability protection; see commingling funds in an LLC.

Do I pay tax on money I leave in the business?

Yes. You are taxed on the business's profit for the year, not on what you withdraw. A sole proprietor reports net profit on Schedule C, and partners and S corp shareholders must report their share of income "whether or not distributed" (same rule for S corps). An owner who netted $80,000 but drew only $40,000 still owes tax on $80,000.

How do LLC partners pay themselves?

Partners take guaranteed payments, distributions, or both, reported on Schedule K-1. While the LLC is taxed as a partnership, partners are not employees and should not be issued a Form W-2.

• Guaranteed payments are amounts determined without regard to the partnership's income, usually for work you do. The partnership deducts them, you report them as ordinary income, and nothing is withheld.
• Distributions are withdrawals of your share of profit, which you are taxed on whether or not it is distributed.

Your self-employment earnings appear in Schedule K-1 box 14, code A and carry to Schedule SE. The "limited partner" exception to self-employment tax is narrow and disputed for LLC members who work in the business, and guaranteed payments for services are self-employment income regardless. Get a CPA's view before relying on it.

How do I pay myself if my LLC is taxed as an S corp?

You pay yourself a salary through payroll and take the remaining profit as distributions. A shareholder who works in the business is a corporate officer and an employee for FICA, FUTA, and income tax withholding, and the LLC reports employment taxes under its own name and EIN.

For 2026, the salary carries Social Security of 6.2% from the business and 6.2% from you on wages up to $184,500, Medicare of 1.45% each with no cap, and FUTA of 0.6% on the first $7,000 when you get the full state credit. You also register for state unemployment insurance and, in states with an income tax, state withholding. Treatment of corporate officers varies by state; check with your state unemployment agency.

The salary has to be reasonable. The IRS says distributions must be treated as wages to the extent they are reasonable compensation, and courts have upheld reclassifying them. See how to set an S corp reasonable salary.

To elect, file Form 2553 no more than 2 months and 15 days after the start of the tax year you want it to cover, or any time in the year before.

What if my LLC is taxed as a C corp?

You pay yourself a salary through payroll, and the corporation can also pay you dividends. Officer wages should be commensurate with their duties. The corporation pays a flat 21% tax on its profit, and qualified dividends are taxed again on your return at 0%, 15%, or 20% for 2026.

In our view, that second layer usually makes a C corp the costliest option for a solo owner who takes most of the profit out; it fits better if you plan to keep earnings in the business or bring in investors.

How much should I set aside for taxes?

If you take draws or guaranteed payments, set aside about 14.1% of profit for self-employment tax, plus federal and state income tax.

Self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare) once you net $400 or more, applied to 92.35% of net profit, which works out to about 14.13%. For 2026, the 12.4% part stops at $184,500 of combined wages and self-employment earnings. Medicare has no cap, and an extra 0.9% applies above $200,000 (single) or $250,000 (married filing jointly).

Nobody withholds from a draw, so you pay quarterly estimates if you expect to owe $1,000 or more for 2026 after withholding and credits:

You avoid an underpayment penalty if your payments and withholding cover the smaller of 90% of your 2026 tax or 100% of your 2025 tax (110% if your 2025 AGI was over $150,000). See quarterly estimated taxes for sizing each payment. S corp owners can cover much of this through withholding on their salary, though K-1 profit may still need estimates.

Worked example: draws vs. an S corp salary

At $80,000 of profit, an S corp with a $50,000 salary cuts payroll-type tax by about $3,612, but the net federal saving is about $2,186, because a smaller QBI deduction gives $1,426 back as income tax.

Assumptions: 2026, single filer, no other income, the $16,100 standard deduction and 2026 tax brackets, no retirement contributions or health insurance, profit measured before any owner pay, federal only. The salaries are illustrations, not recommendations.

The qualified business income (QBI) deduction lets pass-through owners deduct up to 20% of business income. For 2026 its income limits start at $201,750 of taxable income for single filers, well above this example. The catch for S corps: reasonable compensation paid to you is not QBI, so every dollar of salary is a dollar the 20% no longer covers.

$80,000 of profit

Default single-member LLC (draws):

1. Self-employment tax: $80,000 × 92.35% = $73,880 × 15.3% = $11,304
2. AGI after deducting half of it: $80,000 − $5,652 = $74,348; minus $16,100 = $58,248 taxable before QBI
3. QBI deduction, limited here to 20% of taxable income: $11,650
4. Taxable income $46,599 → federal income tax $5,344
5. Total federal: $16,647

Same business as an S corp, $50,000 salary:

1. Payroll tax: $3,825 employer FICA + $3,825 employee FICA + $42 FUTA = $7,692
2. Profit on your K-1: $80,000 − $50,000 − $3,825 − $42 = $26,133
3. AGI: $50,000 + $26,133 = $76,133; minus $16,100 = $60,033 taxable before QBI
4. QBI deduction: 20% × $26,133 = $5,227 (the salary is not QBI)
5. Taxable income $54,806 → federal income tax $6,769
6. Total federal: $14,461

Figures are rounded from unrounded math, so a total can differ from its lines by $1.

$150,000 of profit, and what the salary does

Raising the salary from $80,000 to $100,000 cuts the saving by almost three-quarters, which is why the salary has to be set on the facts and documented.

These savings come before what an S corp adds: payroll costs, a Form 1120-S return each year, state unemployment tax on your salary, and any state entity tax. At $80,000 of profit, those can eat much of a $2,186 saving. Whether the election pays off is a question for a CPA who can see your full return; see when an S corp election makes sense.

Does my state change the math?

Yes, sometimes by enough to change the answer.

• California charges every LLC an $800 annual tax, plus a fee once California income reaches $250,000. An S corp pays 1.5% of its California net income, with an $800 minimum. The 1.5% costs more than the LLC's $800 once the S corp's California net income, after your salary, passes about $53,300.
• New York City does not recognize the S corp election, so a federal S corp doing business there pays the city's General Corporation Tax.

What to do next

1. Find your LLC's tax classification: check whether you filed Form 2553 or Form 8832, or which form your last business return used (Schedule C, Form 1065, Form 1120-S, or Form 1120).
2. If you take draws or guaranteed payments, record each draw and set up quarterly payments with the 2026 Form 1040-ES and IRS Direct Pay.
3. If an S corp might pay off, run your numbers the way the worked example does and take them to a CPA along with your state's entity taxes.
4. If you are already an S corp, set and document your salary using how to set an S corp reasonable salary, then set your W-4 withholding with the IRS Tax Withholding Estimator.
5. Run payroll for yourself on a regular schedule; running payroll when you're the only employee covers the steps. CheckMate calculates your withholding, FICA, FUTA, and state taxes, generates your W-2 and Form 941, and reminds you before each 941 deadline; you still make the deposits and filings. It charges only when you run payroll, so paying yourself quarterly means no charge in the months between.

FAQ

Does the QBI deduction still exist in 2026? Yes. P.L. 119-21 made 26 U.S.C. § 199A permanent at 20%, and from 2026 owners with at least $1,000 of QBI from a business they actively work in get a deduction of at least $400.

Can my S corp pay my health insurance? Yes. Premiums for a more-than-2% shareholder are deductible by the S corp and reported as W-2 wages, but they are not subject to Social Security, Medicare, or FUTA under a qualifying plan.

Can I switch my LLC to S corp taxation partway through the year? The election generally starts at the beginning of a tax year, and Form 2553 is due within 2 months and 15 days of that start. If you missed it, late-election relief is available within 3 years and 75 days of the intended effective date; a CPA can tell you whether you qualify.

Sources

1. IRS, "Limited Liability Company (LLC)." https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
2. IRS, Instructions for Form 2553. https://www.irs.gov/instructions/i2553
3. IRS, "Single Member Limited Liability Companies." https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies
4. 26 C.F.R. § 301.7701-2, business entities; definitions. https://www.law.cornell.edu/cfr/text/26/301.7701-2
5. IRS, Publication 334, Tax Guide for Small Business (2025). https://www.irs.gov/publications/p334
6. IRS, Publication 583, Starting a Business and Keeping Records. https://www.irs.gov/publications/p583
7. 26 C.F.R. § 1.702-1, income and credits of partner. https://www.law.cornell.edu/cfr/text/26/1.702-1
8. 26 C.F.R. § 1.1366-1, shareholder's share of items of an S corporation. https://www.law.cornell.edu/cfr/text/26/1.1366-1
9. IRS, "Paying Yourself." https://www.irs.gov/businesses/small-businesses-self-employed/paying-yourself
10. IRS, Publication 541, Partnerships (12/2025). https://www.irs.gov/publications/p541
11. IRS, Partner's Instructions for Schedule K-1 (Form 1065). https://www.irs.gov/instructions/i1065sk1
12. 26 U.S.C. § 1402, definitions (self-employment income). https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1402&num=0&edition=prelim
13. IRS, "S Corporation Employees, Shareholders and Corporate Officers." https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-employees-shareholders-and-corporate-officers
14. IRS, Publication 15 (2026), Employer's Tax Guide. https://www.irs.gov/publications/p15
15. IRS, "S Corporation Compensation and Medical Insurance Issues." https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues
16. 26 U.S.C. § 11, tax imposed on corporations. https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section11&num=0&edition=prelim
17. IRS, Revenue Procedure 2025-32 (2026 inflation adjustments). https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
18. IRS, "Self-Employment Tax (Social Security and Medicare Taxes)." https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
19. IRS, Form 1040-ES, Estimated Tax for Individuals (2026). https://www.irs.gov/pub/irs-pdf/f1040es.pdf
20. 26 U.S.C. § 199A, qualified business income, with P.L. 119-21 amendment notes. https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section199A&num=0&edition=prelim
21. California Franchise Tax Board, "Limited Liability Company." https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html
22. California Franchise Tax Board, "S Corporations." https://www.ftb.ca.gov/file/business/types/corporations/s-corporations.html
23. NYC Department of Finance, "Business General Corporation Tax (GCT)." https://www.nyc.gov/site/finance/business/business-general-corporation-tax-gct.page
24. U.S. Department of Labor, State Unemployment Insurance Agencies. https://oui.doleta.gov/unemploy/agencies.asp
25. IRS, Direct Pay With Bank Account. https://www.irs.gov/payments/direct-pay-with-bank-account
26. IRS, Tax Withholding Estimator. https://www.irs.gov/individuals/tax-withholding-estimator