How you pay yourself from an LLC depends on how it’s taxed. If you’re a single-member LLC, you typically take an owner’s draw. If you’ve elected S Corporation status, you must pay yourself a reasonable salary via payroll, then take distributions. The key is knowing your entity’s IRS classification—and following the rules.
How to Pay Yourself from an LLC in 2025
If you recently formed an LLC—or are just now making real money—it’s natural to ask: “How do I pay myself without messing up my taxes?”
Let’s break it down by LLC type, tax structure, and the IRS rules you need to follow.
🔹 Single-Member LLC (Default Taxation)
If you’re the only owner and haven’t elected S Corporation status, the IRS treats you as a disregarded entity. That means your LLC income is reported on your personal tax return (Form 1040, Schedule C).
How You Get Paid:
You don’t take a “paycheck.” You take an owner’s draw from your business bank account.
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No W-2 required
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No payroll taxes withheld
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But you still pay self-employment tax (15.3%) on all net profit
📌 Explore how to reduce your self-employment tax in 2025 »
🔹 Multi-Member LLC (Partnership Taxation)
If your LLC has two or more members and hasn’t elected S Corp status, it’s taxed as a partnership (Form 1065). Partners are not employees—they receive guaranteed payments or profit shares.
How You Get Paid:
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Distributions based on the partnership agreement
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Income flows through to each partner’s personal return (Schedule K-1)
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Partners pay self-employment tax on their share of active income
🔹 LLC Taxed as an S Corporation
Once your net profit crosses ~$50,000 per year, you might benefit from electing S Corporation status (by filing Form 2553). This changes everything about how you pay yourself.
How You Get Paid:
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You must pay yourself a reasonable salary via payroll
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Any profits above your salary come to you as distributions (which are not subject to self-employment tax)
💡 Example:
Your LLC nets $100K
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You pay yourself a $50K salary (subject to payroll tax)
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You take the remaining $50K as distributions (no payroll tax)
This setup can reduce self-employment taxes by thousands—if done right.
📌 Need help setting up an S Corp structure? Start here »
What’s a “Reasonable Salary”?
This is the IRS’s #1 enforcement area for S Corps. If you underpay yourself to avoid payroll taxes, they can reclassify your distributions as wages—and hit you with penalties.
Factors the IRS looks at:
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Industry averages for your role
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How much time you spend in the business
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Business profitability
Final Thoughts
How you pay yourself from an LLC isn’t just a technicality—it’s a major factor in your tax liability, audit risk, and long-term strategy.
At Polaris, we help entrepreneurs across North Carolina and Florida navigate LLC formation, payroll setup, and tax planning tailored to their needs. Whether you’re just starting or ready to scale, we’ll help you do it the right way.