TL;DR:As an LLC owner, you can pay yourself throughowner’s draws(default method) or, if you electS-Corp status, viasalary + distributions. Each option affects your taxes, compliance, and take-home pay. This guide breaks down LLC pay rules, IRS guidance, and state-specific considerations (CA, TX, NY, FL).
AtSam’s List, the marketplace founder resource, we help business owners set up clean financial systems so they avoid IRS issues and scale with confidence.
What It Means to Pay Yourself from an LLC
Definition:Paying yourself as an LLC owner means transferring money from the business to your personal account as an owner’s draw—or as a salary if taxed as an S-Corp. (IRS guidance on LLCs)
👉Key Takeaway:Default LLCs = draws; LLCs taxed as S-Corps = salary + distributions.
Owner’s Draws: The Default LLC Method
Simple: Transfer funds directly from the business account.
Taxed on business profits, not withdrawals themselves.
Must track and set aside funds for quarterly estimated taxes (SBA tax guide).
👉Key Takeaway:Draws are easy and flexible but require discipline on taxes.
Electing S-Corp Status: Salary + Distributions
IRS requires areasonable salaryif you provide services.
Distributions beyond salary avoid payroll taxes.
Works best once your LLC has steady profits (often $60K+).
👉Key Takeaway:S-Corp election can reduce payroll taxes—but adds complexity and compliance.
State-Level Considerations (U.S.)
Definition:Federal rules apply everywhere, but states add extra costs and compliance requirements.
California:$800 annual LLC fee; reasonable comp rules apply if S-Corp (CA Franchise Tax Board).
Texas:No state income tax; franchise tax applies (Texas Comptroller).
New York:Annual filing fees scale with income; payroll tax obligations apply (NY Dept of Taxation).
Florida:No state income tax; unemployment insurance applies to payroll (Florida DOR).
👉Key Takeaway:Factor instate-specific fees and taxeswhen deciding draw vs salary.
Step-by-Step: How to Pay Yourself as an LLC Owner
Definition:Practical process to set up and stay compliant.
Form LLC and open a dedicated business bank account.
Decide: default LLC vs S-Corp election.
For draws: transfer funds and document.
For S-Corp: run payroll through software (Gusto, Rippling).
File quarterly estimated taxes and keep clean books.
👉Key Takeaway:Documentation + payroll tools = compliance + audit protection.
Comparison Table: LLC Owner’s Draw vs S-Corp Salary
| Method | Taxes | Flexibility | Admin Complexity |
|---|---|---|---|
| Owner’s Draw | Profits taxed; no payroll tax | High | Low |
| S-Corp Salary | Salary taxed + distributions | Medium | Higher |
FAQs
Q: Do LLC owners need payroll?
A: No, unless you elect S-Corp status. Then salary is required.
Q: When should an LLC elect S-Corp status?
A: Usually once profits exceed $60K–$80K annually.
Q: What is a reasonable salary for S-Corp owners?
A: The market-rate pay for the services you perform. IRS expects documentation.
Q: How do I pay myself as an LLC owner in Texas?
A: Most LLCs take draws; S-Corps pay salary. No state income tax, but franchise tax applies.
Q: How do I pay myself as an LLC owner in Florida?
A: Draws are default; S-Corp payroll requires unemployment insurance contributions.
Final Thoughts
Getting paid as an LLC owner is aboutchoosing the right method for your growth stage. AtSam’s List, we guide founders through LLC compensation strategies so they can pay themselves confidently and stay compliant.
👉 Want more tactical guides?Join Sam’s Listfor weekly insights trusted by founders.
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Author: Kimi, Co-founder of Sam's List
Kimi writes about what she's learning while building Sam's List and shares honest takeaways from her conversations with accountants and financial advisors across the country. None of this is financial advice—just the stuff most people wish someone told them sooner.
