One of the biggest mistakes LLC owners make? Mixing personal and business funds AND not setting aside enough for taxes!
Here’s how to do it right: 🔹 Step 1: Open a Business Bank Account ✔ All business income should go into your LLC’s bank account—NOT your personal account. ✔ Pay yourself from this account—never use business funds for personal expenses.
🔹 Step 2: Pay Yourself the Right Way ✅ Single-Member LLC (Default Taxation) ✔ Take an owner’s draw by transferring money from your business account to your personal account. ✔ No payroll taxes on draws, but set aside 25-30% of your gross income for taxes (self-employment & income tax). ✅ Multi-Member LLC ✔ Each member takes distributions based on the operating agreement. ✔ Taxes aren’t withheld automatically, so set aside 25-30% and plan for quarterly estimated tax payments. ✅ LLC Taxed as an S-Corp ✔ Pay yourself a reasonable salary through payroll (W-2 income). ✔ Take additional profits as distributions (not subject to self-employment tax). ✔ Payroll taxes apply to your salary, but still set aside extra for taxes on distributions.
🔹 Step 3: DO NOT Commingle Funds 🚨 ❌ DON’T pay personal expenses directly from your business account. ❌ DON’T deposit business income into your personal account. ✅ DO transfer your pay from the business account to your personal account to stay IRS-compliant.
🔹 Step 4: Save for Taxes Now! 💰 Set aside 25-30% of your gross income for taxes to avoid a big bill later. 💡 Use a separate savings account for tax money so it’s ready when you need it.
Need help structuring your LLC pay and tax plan? Let’s chat!
