How do LLC founders get paid?
How you pay yourself depends on how your LLC is taxed, not on the fact that it’s an LLC. Here are the four ways it can go.
The short version
Single-member LLC (taxed as an individual, Form 1040): no payroll for the owner. You take owner draws. You’re taxed on profit whether you take it out or not.
Multi-member LLC (taxed as a partnership, Form 1065): no payroll for partners. You take guaranteed payments and draws. Guaranteed payments are self-employment income.
S corp election (Form 1120-S): payroll is required. The IRS expects a reasonable salary before you take draws.
C corp election (Form 1120): payroll is allowed. Dividends aren’t deductible, so that money is taxed twice.
Questions
Can an LLC owner be on payroll?+
Only if the LLC is taxed as an S corp or C corp. Single-member and multi-member LLCs taxed by default pay owners through draws or guaranteed payments.
Does an S corp owner have to take a salary?+
Yes. The IRS requires a reasonable salary through payroll before you take draws.
Is there an LLC tax form?+
No. An LLC files as an individual, partnership, S corp, or C corp, by default or by election.
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