How to Pay Yourself in a Single Member LLC
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- Опубликовано: 28 дек 2024
- In today's video, I share with you the proper method to pay yourself if you own a Single Member LLC. Single Member LLC's are one of the most powerful and flexible legal entities that most online entrepreneurs use to protect not only their business, but also their personal assets.
However, if you don't set up the LLC properly, it won't provide you any protection at all.
Today we talk about how to pay yourself if you have set up a Single Member LLC. This will be especially helpful for you solopreneurs out there who are building businesses on the side.
I've written a more in depth blog post on this issue at my website:
bit.ly/2a2GMYy
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This video is for entertainment and informational purposes ONLY and should NOT be considered legal advice. By watching a video or commenting on a video, we are not forming an attorney-client relationship. If you need specific legal advice, please ask an attorney in your state.
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Thank you for watching! I just announced a new FREE training that reviews the exact 10 Step Process I use for starting an Online Business: www.obfoundations.com/10steps
Can you create a LLC when you are a stock market trader?
Aw man very good video thanks
Can you go over how you pay yourself in an "S Corp" scenario?? I know you did a talk for the Single Member LLC.
Thanks!
Hawthorn Law In a single member LLC are you tax on gross sales or,
after all business expenses, net sales?
If your LLC gets a fine, and it bankrupts it, what is your personal liability?
Wow, Jim, I'm very glad that I chose your video. You are very informative. I might have a few questions.
Here maybe within a few days or so. But I am trying to start my own LLC
Business.
Glad it was helpful!
3:44 to 4:37 I'm quite confused. So, let's say I earn $1,000 in a month in a single member LLC, disregarded entity. Should I not set aside 15.3% of that for tax, which would be $153? Even with Profit First?
Your videos are very informative and straight to the point. Thank you so much for helping us small business owners, I also appreciate the simplicity of your explanations. I never leave your sight wondering... and for whatever reason if I do have a question, guess what? You made a video for that too
MAN, I COULD HV LISTEN TO U ALL DAY ON DAT NOTE !¡
thanks for your video I just switch my company from S-Corporation to Llc . I was told Llc is better.
Got an LLC for a t shirt business, I’ve been too busy to get started. Since I’ve bought the equipment little by little and I work 70 hrs a week. I don’t know what to file since I’ve actually not made any money yet.
did your biz succeed?
How has your business performed?
Thank you. You just confirmed that I need an accountant
good answer.
I’m still confused. 🤪
Awesome videos!!! Quick, clear, and to the point. Really appreciate this advice! Especially from an attorney!
1:30 that's a check. Slow down I'm taking notes...
I am still waiting on you finishing the notes
I really appreciate you speaking about Profit First, I think it's a book/syster everyone should know about.
Thank you so much for all your great information! I will definetly consider booking a call with you as your fee is very reasonable, and you are knowledgeable and sincere. I just formed a single member LLC and yes its for ECommerce.
talk to a local CPA as soon as possible. You will probably have to collect sales taxes on the sales in your state. That means you need to register and file sales tax reports.
Due to your recommendation, I purchased Profit First. Thanks for this great info, and the solid book recommendation.
Yeah - it's a good one!
Excellent informative video. I like how you mentioned a threshold for S corp netting etc. Many people will start to learn from this video.
Could you make a video about LLC file taxes? such as payroll taxes? thank you
Hong Sok There is no need for payroll taxes if you're paying yourself in a single member LLC.
they better not have a c corp lol that would be horrible haha s-corp would be good though
Honest Sok
If you elect S-Corp status you may need to pay yourself a salary.
Hong Sok I would like to know as well
I'm confused, under a Sole Member LLC, wouldn't you get taxed on all profits, not just those you put into an "expense" Account?
Hey thanks so much for these videos. I am starting a Epoxy countertop and Table business and I'm using Legal Zoom to get my paperwork completed. But I have no idea how to pay myself or how much. Also, my expenses will largely be materials from Home Depot and an online distributer. Should I get a business credit card and then pay from my business account every month?
how much money do you leave in your operating expense account typically? does that account usually stay close to empty to just cover expenses?
Thank you for this super helpful video! I'm doing research on LLC's. Your video popped up on my home page.
I've learned a lot and I recently am a new subscriber. I noticed a lot of times in your videos you talk about S corporation and LLC I'm not sure what really those mean or if they're any different from regular incorporation or regular proprietorship.. I would like to have more details on what these letters and types of businesses are.
What if you start up a LLC in a specific state, then move to another state in the future? Do I then have to re do it according to the state that o currently reside in or where it was founded??
Thank you for this video it reminded me of back in 1992 when I began working in the computer industry I wanted to incorporate and looked around at various ways to do that. I was at a meeting with the IRS where a fellow engineer had formed a K Corporation and it was the worst thing he could have done for various reasons, mainly Healthcare options. I then began to do research for the companies that I would work for and I found some striking similarities that Intel, Oracle, IBM, Microsoft, McAfee, all of the Silicon Valley companies except Hewlett-Packard back then were C corporations based in Delaware. I found a place that would incorporate me as a C corporation for $300 and I Incorporated. It was a great learning experience I will also never forget the day that Intuit threatened to sue me when I reverse-engineered their QuickBooks Pro database to fix a bug in their program regarding employee training tax! The other humorous moment that sticks in my mind is when my contract at Intel had finished and I went to collect unemployment at the local EDD office she asked me what happened I said those horrible corporate moguls let me go! We then commiserated for a few minutes I didn't have the guts to tell her I was talking about myself! Even though I realize now there was some minor double taxation which I minimized it was still a great ride!
Wow. I paid a guy $300 for this info a few months ago. Smh 😩
br3wskee 🤫🤫🤫🤫🤫
Yeah that's accountants for you every minute is billable.
Evil Ghandi dude why are u mad
@Evil Ghandi Well they might as well be fast food employees cause they just got this info for free. So the $300 might not have been worth it.
@Evil Ghandi I understand free market and that's why this dude on youtube giving free advice quicker and better than what a scheduled in person, and potentially unhelpful appointment is. I want more market competition with lower prices and better service so that would be a no for Biden. Nothin for nothing. Don't worry I'll still be paying my competent accountant a nice fee for his expertise this april. Not trying to discredit but there are some situations where free RUclips is better and others where you need the pro no doubt.
What 4 bank accounts would you recommend for single member llc?
1)personal checking (already have)
2)?
3)?
4)?
Would greatly appreciate your feedback
1. Operating
2. Owner Pay
3. Tax
4. Profit
Hey Jim, thank you explaining in details. I just formed my LLC in my home state in Delaware. I am an independent contractor, but some of my employers insist on paying me directly, and not my company. They say they hire me and some my company. Would it be okay to deposit my check into the LLC account? Thank you.
Great question. I sure hope he or somebody answers... Sure would be nice to know.
I am a single member LLC for a rental property. When the rental income goes to my business checkings and I write a check to myself, will I get taxed for that at end of year?
Hi, thank you all your information, very knowledgeable. I learn so much. I am from Cleveland Ohio and and I am look for e-commerce CPA. Could you please recommend a person for our community. We are LLC now, but we have to search to corporation next year. Thank you
So, this is why I was having to file quarterly. Thank you for the education. Great video!!
What if you have a business debit card. Can you use it to eat on when working on a job?
If you're single memeber LLC, you can't pay yourself salary according to the IRS tax code. Because you are considered a disregarded entity and so you're automatically a sole proprietor. Basically to answer your question you could use your business debit card for personal stuff since you're considered sole proprietor in the IRS eyes, but if you were to get sued you could lose the protection that comes with a limited liability if the court can determine your identity and your entity are one and the same not separate. Hence why it's called "limited liability"
DO NOT co-mingle funds. You can use the BUSINESS debit card to pay for BUSINESS expenses. Taking a client or customer to lunch is a business expense. Ordering in a burger and fries to your office is not, usually. Example: During tax season we order food in for the staff. Keeps up productivity, and discourages long lunches. That is a business needs expense.
Do not save the step, just because you don't want to transfer money from the business to your personal account just to pay your home cable bill. Keep the Chinese wall up between your business banking and your personal banking.
So for an LLC, since LLC has to pay self-employment tax of 15% on gross income, with the way you allocate money into 4 separate accounts described in this video, which I think is a great way to do it, besides allocating that 20% of 30% of your Expenses account for paying tax, shouldn't we add another 15% for self-employment tax? Thank you.
Is it weird that I understood you and got lost at the same time? So the “taxes” account, should I create a new bank account for that or can it stay in my business bank account? Or could I allocate it to my business savings account for the end of the year?
Thank You, Mr Jim
what if host 2 events per year (as a single member llc) january & july. when would i have to file my taxes? quarterly or is there a once per year "at the end of the year" option?
since i'll have a 6 month gap without no income // 8 overall months without business income.
Every situation is different. I would talk to an accountant.
I’m so glad I found you! Thank you so much for your videos! They’re very helpful
A good infomation. Thanks. I have a question. I incorporated my LLC at Michigan state but EIN have an address at Illinois state. Where should I pay taxes?? MI or IL??? I'm so confused
thank you for taking your time and sharing this information I do appreciate it.
Question regarding a potential alternative to paying yourself via check. Between your business and personal checking accounts, is there any aversion to taking a member distribution from your LLC by performing an electronic funds transfer from business->personal and noting in the transaction memo that this is a member distribution? What, if any, are the gotchas?
I think you can do that - but in my experience most banks won't let you link a business and personal checking account. But I suppose it is possible.
@@jimhart PNC Bank does. I just completed the process.
Thanks. You make me feel better. I thought I was ripping myself off on my taxes by not having a s corp for all these years. 35k to 50k net income is reasonable salary at the minimum. Nobody else has that answer. 👍🏻
You're welcome Jeff! Thanks for the comments.
This is probably a really stupid question, but please forgive me. Let’s say you create a business, put 25% down and finance the remainder. Will the loan institution allow you to pay yourself or family a salary? I didn’t know if the loan had to be paid off first or not. Thank you!
Hi. So when I write a check from my business to me for some spending money in the note section of the check I just write member distribution? Correct?
Now I use Quicken to keep track of everything. What would I list paying myself as in Quicken? Would be considered an expense to my business? What do I put for the memo and category. So confused :-(
You mention member distribution, does this also apply to if one chose the manager managed type for their LLC? 🤔
Do all the members have to sign the operation agreement in CT, 4 members
One of the member refuse to sign?
all members have to sign. make him an employee.
So DBA/LLC (sole proprietor) is pretty much the same. Which do you suggest to save on taxes?
Thank you Matt Damon
I guess they cut out the fighting seen.
Any advice about insurance for a business?
Hello what about foreign-owned LLC operate outside of USA? do we need to pay taxes as well? thank you
Question if provide a service also working with my team of contractor - do I pay my self like the other contractor or after profits of any are left over ? Some guidance is very much appreciated
So the LLC needs to have 3 business accounts: Expense, Taxes and Profit. To avoid a high tax on all profits, what is needed?
Lots of actual expenses. Taxes are taxes. Don't avoid. Just make sure you never miss the payment.
Hawthorn Hacks.... that’s a good name for your show
Amazing video… Thank you so much for this really insightful information! God I needed to hear this❤️💯👍
great stuff man. thanks. as a newly LLC i will definitely consider this as well as your business.
Thank you sir! You were very helpful. I needed someone to break down how to pay yourself...not knowing what items should be withheld; taxes, owners profit. I am very new to running my own business. Are there forms out there that will help you see what percentage you should be withholding? Or samples to learn off of?
#hawthornlaw what software do you recommend using when you have LLC for accounting and tax purpose?
Can you send the money electronically instead of writing a physical check to yourself?
Thank you for this wealth of information. Is it ever better to choose sole proprietor status? What are the benefits of choosing a sole proprietorship?
For a single member LLC do you have to pay the 15% self employed tax and is creating a s-corp the only way to get out of paying that. Does the self employed tax only tax profits or losses as well
Check out today's video where I talk about this a bit more... ruclips.net/video/m_LftgIO3vQ/видео.html
Can you have the goods produced overseas and imported here to sell via Ecommerce platform. How will you pay your employees overseas ?
So I've set up an LLC, paid the fees to the state, paid for checks, paid a lot of mileage traveling to potential customers, etc. etc. but the LLC has not made any money yet. How do I handle the money that I am "advancing" to the LLC to get it up and running? Do I need to put funds of my own into the LLC's bank account to pay myself those expenses back? How do I best handle this?
Kurt Mohnsam great question.
The mony you have "invested" is your capital. You need an accountant NOW.
Very useful Info. Direct to the point.
If I have 2 business do I need an LLC for each one, or is there a way to convert them into one LLC?
I formed a llc to become a independent contractor with a company that outsources work from home. However, applied for my ein as a sole member. I could not select this on the W9. I could only select llc with S Corp status
. What should I do with the IRS regarding sole member... Will I have to have another ein assigned?
I don't know what version of a W-9 you were looking at, but here is the one from IRS.GOV
www.irs.gov/pub/irs-pdf/fw9.pdf
It clearly has a choice for sole prop/SMLLC and another choice for regular LLC.
On payroll check we don’t deduct taxes for an llc company owner?
Thanks for the video. Question. Can I start S corporation without ssn. I have only ITIN number.
thanks for the valuable information!! may you consider doing a video on How to Operate a small business as a veteran owned business??
I dont have a business credit card yet for my llc, so should I pay my personal credit cards directly from my llc bank account or do I have to pay myself to my personal account and pay cc’s from there?? Pls help
I want to open a us brokerage account as a us non resident(which is easy and have done it as an individual). However i can only trade shares not options trading. Will opening llc allow me to do this and also save me tax.
Wondering if it can be an automatic deposit??
So are you saying start off as an LLC and change to an SCORP?
No - S-Corp is a "taxing status", not a legal entity. I recommend that people start as an LLC and then when they are making enough money to justify the added complexity of an S election, they make that election with the IRS (you will need to file a separate tax return, pay yourself a salary, etc.) LLC's are a lot easier to manage when you are getting started.
Hi Jim, My son and I started our LLC partnership in Feb 2019. We will be making 50k+ year. Should we be S Corp? Is it within 75 days of getting LLC. Or can we become S Corp later? And do we need a lawyer to write something up for partnership? We both work for company and have one employee. Do we pay ourselves certain amt or just hours we work? Lot to know. I appreciate your advice. Joyce
Let me know if you would like to schedule a call to discuss. www.hawthornlaw.net/contact-us/
Can I please email you for advice on your situation?
Awesome videos and info. You have a new subscriber!
Starting my own towing business, just myself. Does this qualify for single person LLC? Or would an s Corp better? It's just myself until I can grow bigger.
Osbon Channel
LLC then s Corp
thank you for speaking clearly and staying on point, you're awesome at explaining this. keep it up :)
What if they do away with checks cause personally I don't have checks can't I just transfer payment to myself from my business account to my personal account???
Thank you for this information. I am currently collecting N.J. unemployment benefits. I want to start my own business. Am I able to become a LLC while on unemployment? Thanks again for this video.
Hi Joe - I don't see any reason why you can't form the LLC, but if you were to collect an income while on unemployment you would need to report that. Check with a lawyer in New Jersey.
Love the videos keep them coming, just joined the notification squad
Thanks Tammy! I’ve been taking some time off this summer but will be back at it when kids go back to school!
Hello - so you recommend a S Corp after 35-50k of revenue… does that mean start with an LLC until you figure it out… or are you advocating for S Corp to start.?
Do you have one bank with multiple accounts or different banks. No one mentions this.
I have one business bank with multiple accounts for my business.
Hot damn! I'm definitely calling you when I need help. I live in FL!
This is why lawyers should stick to law and leave finance and accounting to CPA's he is on the right track but getting things seriously wrong, to start a single member llc is a schedule C disregarded entity you can't "pay yourself" it all goes to your 1040 either as Schedule C income or as a 1099 issued from the schedule C to yourself, same tax result. If you file an S-election as an LLC then you can setup payroll and have the corporation pickup half the payroll taxes as an expense and you issue yourself a W-2. This is part of the reason I hate lawyers, they get paid a ton and are not very bright.
There is no need to issue a 1099 from Sch C since it will go back into the same Tax Return. Single LLC only protects your assets but concerning Tax Return you will only add a Sch C to your return as any self-employed person.
Liam O’Neil NO! Lol but ok🤗😂
Liam O’Neil You’re referring to the S-Corp model.
Liam O’Neil Wrong, “distributions” are ONLY allocated in the S-Corp model. For fucks sake.
*youtube accountants beware 🚨
Adam Mohr, you can indeed pay yourself as a sole member llc! Whatever portion you pay yourself is w2 income that’s deducted from your business income when you file your taxes.
Can you pay yourself via direct deposit?
Yes, as long as the funds are being transferred from your business account (tied to your EIN #) to your personal account (tied to your personal social).
Of Course! I use ADP.
Have you ever done a video on integrating personally owned assets into an LLC or S-Corp?
Is the Owner’s Profit Account taxable?
Is there a problem with paying yourself from your LLC with a direct bank transfer, and what should the memo/notes say for that kind of transfer?
EFT is fine. memo should read "income distrib"
Thank you for the help!
Thank you! Do you pay any taxes if your operate at a loss and your expenses exceed revenue?
no. and the loss offset other income on you tax return, like W2, interest and dividends.
I am 63 and receiving benefits. I work full time and they are
withholding 3 months of benefits. My full time job may be in question,
so I would like to start a side business in case the job goes away. I
read on the internet that if you start a single member LLC that you
could withdrawn money as a distribution of assets in stead of a wage, it
would not show as gross income on your w2 form. Is this true?
It's true, but it shows up on Schedule C. Still taxable income on Form 1040, just different line.
You are the man 👍🏾
Thank you very informative
Glad it was helpful!
I wanna start multiple businesses can I do it under the LLC?
Ok, so let me see if I get this correct. For my company, let's say company A. So A's taxable income is ONLY what is left AFTER expenses. To include, paying the single member. So let's say 20k gross, -13k operating expenses (which includes paying the single member) leaving 7k which will get taxes at the end of the year?
Very informative video and helpful tax tips on doing this as an LLC vs. a S-Corp.
Thank you so much for the information I so needed that course!
Thank you for making these videos. I'm in the process of buying a bunch of books (including Small Business for Dummies), watching a bunch of videos and generally informing myself to the best of my ability in preparation to form a business. This type of content really helps me. I gave the thumbs up!
Thanks for this great information it’s really helpful. God bless you 🙏😊❤️
Hello I belong to a club IE train club, it has a store connected that has volunteer workers. No one accepts wages, how does or what would be a way to set up the store to be an LLC, with no wages for the members.
Couldn't you do an ACH transfer instead of writing a check? I'd rather not wait 5 business days for the check to process when I can just immediately transfer it. Let me know. Thanks.
Can you do a single at first and then as it grows if I need to have employees switch it?
May I ask what is the purpose of the operating agreement?
How do I start
I just moved to la and I want to start up business and just watched your video on setting up a single llc.
5 seconds into this video, love it already "hey there party people" haha ; thanks for advice in rest of video!
Welcome aboard Gabe S! I just want to let you know that if you have any questions or a topic that you want me to make a video about, just include the hashtag #hawthornlaw in your comment and I'll see what I can do!
If you haven't already, please check out my channel to see all of the topics that I have covered so far:
ruclips.net/channel/UC6t5e6r-JEVoz_yn6SdvLRw
I look forward to seeing you on the channel!