- How you pay yourself from an LLC depends on how the IRS taxes the LLC, not on the letters “LLC”. There are four possibilities: disregarded entity, partnership, S corporation or C corporation.
- A single-member LLC is taxed like a sole proprietorship by default. You take an owner’s draw, which is not a business expense, and you owe income tax and the 15.3% self-employment tax on the whole profit, whether you withdraw it or not.
- A multi-member LLC is a partnership by default. Members take distributions and can be paid guaranteed payments for their work, but the IRS says partners are not employees and should not get a W-2.
- An LLC taxed as an S corporation must pay an owner who works in it a reasonable salary through payroll before taking non-wage distributions. For 2026, Social Security tax is 6.2% from each side on wages up to $184,500.
- Draws and guaranteed payments have no tax withheld, so owners usually pay estimated tax. The last 2026 payment is due January 15, 2027.
This guide is for owners of a US limited liability company who want to move money from the business to themselves legally and understand how each method is taxed. It covers federal income and employment tax for the 2026 tax year (returns filed in 2027).
It does not cover state income tax, state payroll taxes, retirement plans or health coverage, and it is not advice for your return. For that, ask a CPA, an enrolled agent or a tax attorney.
Why does your LLC’s tax classification decide how you get paid?
An LLC is created under state law, but federal tax law has no separate set of rules for it. The IRS sorts every LLC into an existing category. A domestic LLC with two or more members is a partnership. An LLC with one member is a disregarded entity, meaning its income goes on the owner’s own return. Either one can file Form 8832 to be taxed as a corporation, or Form 2553 to be taxed as an S corporation.
So the first question is not “draw or salary”. It is “which of the four am I”. If you never filed Form 8832 or Form 2553, you are on the default: disregarded entity with one member, partnership with two or more. Our LLC vs sole proprietorship guide explains the defaults and the election in more depth.
| Tax classification | How you take money out | Tax form that reports your income | Employment tax on your pay |
|---|---|---|---|
| Single-member, disregarded (default) | Owner’s draw | Schedule C and Schedule SE with your Form 1040 | Self-employment tax on net profit |
| Multi-member, partnership (default) | Distributions; guaranteed payments for services | Form 1065 with Schedule K-1; you report it on Schedule E | Self-employment tax on guaranteed payments and often on the member’s share of profit |
| S corporation (Form 2553) | W-2 salary, then distributions | Form W-2 for the salary; Form 1120-S with Schedule K-1 for the profit | Social Security and Medicare on the salary only |
| C corporation (Form 8832) | W-2 salary; dividends | Form W-2; Form 1099-DIV for dividends | Social Security and Medicare on the salary |
How do you pay yourself from a single-member LLC?
With a single-member LLC on the default treatment, you pay yourself with an owner’s draw: you move money from the business account to your personal account and record it as a withdrawal of equity. You do not put yourself on payroll. The Schedule C instructions say not to include in wages “amounts paid to yourself”, so a draw is not a deductible business expense.
The key point is that you are taxed on the profit, not on what you draw. The IRS says the owner of a single-member LLC pays self-employment tax “in the same manner as a sole proprietorship”. Leave $30,000 in the account and you still owe tax on it. Take out more than the profit and the extra is not taxed again; it simply reduces the money in the business.
- Example: net profit on Schedule C (2026)
- $80,000.00
- Owner’s draws during the year (not deductible)
- $50,000.00
- Net earnings for SE tax: $80,000 × 92.35%
- $73,880.00
- Self-employment tax: $73,880 × 15.3%
- $11,303.64
- Half of SE tax, deductible on Schedule 1
- $5,651.82
SE tax is based on the $80,000 profit, not the $50,000 drawn$11,303.64
The 92.35% factor and the 50% deduction are from the 2025 Schedule SE, the latest version published when we checked; the 2026 form had not been released. The 15.3% rate is 12.4% for Social Security and 2.9% for Medicare. Income tax comes on top and depends on your whole return. For the day-to-day mechanics, see owner’s draw vs salary.
Running a W-2 for yourself through a disregarded LLC does not turn the money into deductible wages. The IRS says you cannot make anyone, yourself included, an employee just by issuing a W-2. If you want to be paid a salary by your own LLC, the LLC has to be taxed as a corporation, usually an S corporation.
How do members of a multi-member LLC pay themselves?
A two-member LLC taxed as a partnership has two tools: distributions and guaranteed payments. The IRS “Paying yourself” page is direct: partners “are not employees and should not be issued a Form W-2” for distributions or guaranteed payments.
Distributions
A distribution is money a member withdraws against profits, like a draw. Publication 541 says a distribution “is not taken into account” in figuring a partner’s share of income. You are taxed on your share of the profit from the K-1, whether or not it is paid out. A distribution reduces your basis in the partnership, and only an amount above your basis can create a taxable gain.
Guaranteed payments
A guaranteed payment is paid to a member for services, or for the use of capital, regardless of whether the LLC makes a profit. The partnership deducts it as a business expense. The member reports it as ordinary income and pays self-employment tax on it, and no income tax is withheld. Publication 541 gives an example. Erica gets a fixed $10,000 a year plus 10% of the partnership’s $50,000 of income after that payment, so she reports $15,000 of ordinary income.
- work in the business more than their co-owners and want that recognized before profits are split
- need predictable monthly pay in a year with uneven profit
- have a written operating agreement that sets the amount
- want income tax withheld for them, because none is
- expect the payment to escape self-employment tax: it doesn’t
- haven’t agreed the terms in writing with the other members
How do you pay yourself from an LLC taxed as an S corporation?
Once your LLC elects S corporation status on Form 2553, an owner who works in the business is an employee of it. The IRS says S corporations “must pay reasonable compensation to a shareholder-employee” for their services “before non-wage distributions may be made”. You get a W-2 salary through payroll, with income tax withheld. Profit left after salaries passes through to the owners on Schedule K-1 and can be taken out as distributions.
The appeal is that distributions are not subject to employment tax, while wages are. For 2026, Publication 15 sets Social Security tax at 6.2% each for employer and employee on wages up to $184,500, and Medicare at 1.45% each with no limit. A $50,000 salary therefore costs $7,650 in combined Social Security and Medicare.
The limit is “reasonable”. The IRS can reclassify distributions as wages, and it looks at where the gross receipts come from. Income from your own work points to wages, while income from employees and equipment can go out as distributions. Running payroll also means Forms 941 each quarter, W-2s and an 1120-S return. How to pay yourself from an S corp walks through setting the salary.
Form 2553 must generally be filed no more than 2 months and 15 days after the start of the tax year it is meant to cover. For a calendar 2027 tax year, that is March 15, 2027. An LLC that files Form 2553 on time does not also need Form 8832. The IRS has a late-election relief procedure, but do not plan around it.
What about an LLC taxed as a C corporation?
This is less common for one-owner businesses. An owner who works in the company is paid wages through payroll, like any officer, and the IRS expects them to be “commensurate with your duties”. Profit paid out to owners is generally a dividend, which the corporation does not deduct. That is the double layer of tax: the corporation pays tax on its income, and you pay tax on the dividend. Loans from the company need real loan terms, or the IRS may treat them as wages or dividends.
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How do you set up paying yourself, step by step?
- Confirm your classification. Check whether the LLC ever filed Form 8832 or Form 2553. If not, it is a disregarded entity with one member and a partnership with two or more.
- Keep a separate business account. Every draw, distribution or paycheck should be a transfer you can trace. Mixing personal spending into the business account makes the books, and your liability protection, harder to defend.
- Write it down. Members of a multi-member LLC should set out guaranteed payments and distribution rules in the operating agreement. A single owner should still record each draw in the books.
- Set money aside for tax. Draws, distributions and guaranteed payments have no withholding. Estimated tax is paid with Form 1040-ES, by IRS Direct Pay or EFTPS. If a payment page will not load, check whether IRS payment systems are down before you try again.
- Put the dates in your calendar. For 2026, the last estimated payment is due January 15, 2027. W-2s for an S corporation are due February 1, 2027, and Forms 1065 and 1120-S are due March 15, 2027. Our federal tax deadlines calendar keeps the full list.
- Review once a year. If profit grows, ask a CPA or enrolled agent whether a different classification still fits.
Frequently asked questions
Can I pay myself a salary from a single-member LLC?
Not as a W-2 employee while the LLC is a disregarded entity. You take owner’s draws, and you are taxed on the business profit through Schedule C and Schedule SE. To be paid wages, the LLC must elect to be taxed as a corporation, usually an S corporation.
Are owner’s draws taxed?
The draw itself is not what is taxed. A single-member LLC owner pays income tax and self-employment tax on the year’s net profit, whether the money is drawn or left in the account. That is why a draw is not deductible either.
What is a guaranteed payment in an LLC?
It is a payment a partnership-taxed LLC makes to a member for services or capital, regardless of profit. The LLC deducts it, and the member reports it as ordinary income subject to self-employment tax, with no income tax withheld.
Can an LLC member get a W-2?
Not from an LLC taxed as a partnership: the IRS says partners are not employees and should not get a W-2 for distributions or guaranteed payments. An owner who works in an LLC taxed as an S or C corporation is an employee and does get a W-2.
How much salary should an S corp owner take?
The IRS requires “reasonable compensation” for services before non-wage distributions. It looks at what you do and where the company’s gross receipts come from. There is no fixed percentage, so set the figure with a CPA or enrolled agent.
Do I need to pay estimated taxes on LLC draws?
Draws, distributions and guaranteed payments have no withholding, so owners who expect to owe $1,000 or more usually pay quarterly with Form 1040-ES. The fourth 2026 payment is due January 15, 2027.
Sources
- IRS: Limited liability company (LLC) (default classifications, Form 8832)
- IRS: Single member limited liability companies (Schedule C, self-employment tax)
- IRS: Paying yourself (partners not employees, officers, dividends, loans)
- IRS: Instructions for Schedule C (2025) (no wages for amounts paid to yourself)
- IRS: Schedule SE (Form 1040) 2025 (92.35% factor, 50% deduction)
- IRS: Self-employment tax (15.3% rate)
- IRS Publication 541: Partnerships (distributions, guaranteed payments, example)
- IRS: Instructions for Schedule SE (SE tax on guaranteed payments)
- IRS: S corporation compensation and medical insurance issues (reasonable compensation)
- IRS Publication 15 (2026) (6.2% and 1.45%, $184,500 wage base)
- IRS: Instructions for Form 2553 (2 months and 15 days, no Form 8832 needed)
Checked on October 25, 2026 against irs.gov. Tax rules change; the IRS and the Internal Revenue Code always prevail.