how to pay yourself
as a single member llc
In this video, I am going to share with you the right way to pay yourself if you own a Sinlge Member LLC.
If you’re a business owner you may be wondering, “how do I pay myself?” “Do I need to put myself on payroll?”
It’s important you understand how to pay yourself as a Single Member LLC, for both legal and tax purposes.
Single Member LLCs are an incredible legal entity that you can use to protect your personal assets. Having said that, failure to set it up and pay yourself as a business owner could ruin that protection.
By the end of this video you will understand how the government views a Single Member LLC for tax purposes. And also how to pay yourself as a Single Member LLC!
Become The Entrepreneur You Always Wanted To Be
What’s going on, guys Ravi Abuvala here, founder of ScalingWithSystems.com, and in this video, I’m going to show you exactly how you should be paying yourself as a single member LLC so that you’re good to go in the eyes of the government. You’re good to go in the eyes of the IRS and taxes and you’re good to go whenever you grow and scale your company to hire new team members.
Now, before I go any further in this video, let me first just say I am not a lawyer. I dropped out of law school and not an accountant. And you should always seek your own legal representation and own counsel before you make any serious decisions in your business. This is just something I’ve done inside of my company as well as a bunch of my other clients companies inside of scaling with systems.
OK. So without out of the way, one of the questions I get all the time is “Ravi I’m a single member LLC, meaning I actually have a bench, an entity set up, but I don’t know how I pay myself. Right?” Do I just write myself a check? Do I pull it out of the checking my business checking account whenever I need you to I and meet a business checking account? Do I put myself on payroll? How exactly am I supposed to be getting the profits from my hard work in my company and how I would spend them? How to pay yourself as a single member? LLC is probably one of the most confusing and not talked about topics online. However, it could be very dangerous if you don’t set yourself up correctly in the eyes of the law. And I know it’s not sexy, but it’s very important. So this video is going to cover that. Exactly.
So as I discussed in my previous video LLC virtual proprietorship. Which one is the best for your business? The government, the IRS at least actually sees an LLC and a sole proprietorship as the exact same thing. And they tax you the same way. Meaning they see you and your business as far as tax purposes as one and the same. So that means that on a federal level, because once again your individual tax states may vary on a federal level. All of your gains and losses from your business as a single member LLC is actually be reported on your personal tax return. So I know you got on this video because you want to know how to Pearsall.
So what does that have to do with how you actually end up pulling the profits out of your business and use it for something you want to buy? Well, in reality it means you can really do it however you want to. Since you know, the government for taxation purposes sees you and the business as pretty much the exact same thing, you can pull out what’s known as an owner’s drawer whenever and however you want to. It could be an automatic withdrawal from your business Bengay account and a deposit into your personal bank account that happens once or twice a month.
It could be that you have a check that you write out to yourself, you know, once a month at the end of every single month. Or it could be that USC. You know, that pretty pink little pony. And you want to buy that as a personal expense. And so you quickly go onto your Chase app and you transfer over $15000, your personal account, so that you can give that money to the guy that owns that pretty little pony so that you can buy that for yourself.
By the way, that was just an example. I’ve never done that before. Ever, ever before. I’ve never done it. No. There’s no need for some real life legal paperwork. There’s no need to put yourself on payroll. You just need to have a clear show that there was an owner’s drawer, mean you took the money from a business account and business expenses and you put it into your own personal hands. So that’s really easily done with online banking or with it when you ever write out a check. All year the news just transferred the funds and now your account can see at the end of the year that you took out from your business account and you took it as an owner’s drawer into your personal account.
Let me carry on this whole conversation by saying don’t make the same mistake that I did one of my first years in business. I knew that single member Elyse’s and sole proprietorship for essentially one and the same for tax purposes. And so I kept all of my income and my expenses in one single accounts for both business and personal. That could be an absolute nightmare when it comes to tax season for your accountant to actually go back and see which one was income from personal and business activities. Which ones? Expenses from personal business activities. But even more important than that, if the government sees you what’s known as co-mingling funds between your business and personal accounts, the veil of security that you get from having a limited liability corporation, the whole reason you probably have an LLC almost goes out the window, meaning because you are actually treating you and your business as one and the same, not just for tax purposes, but for everything that you do inside the business. They don’t actually see you as an LLC anymore. They see you as a sole proprietorship. And so for that reason, if anything were to ever go wrong in your company of a lawsuit, you wanted a debt, whatever could go wrong.
They’re gonna come after your personal assets instead of the liability limited liability corporation that you set up with that LLC, no matter what, at the end of the year, you’re going to be taxed on all of the profits that your LLC or single member LLC brings into your company. It doesn’t matter if you end up drawing it out of the business, account it into your personal one. Or if you just leave it the entire time in your business account. So don’t be afraid to pull out enough money into your personal stuff if you want to buy. Some things like a house or a car or whatever like that on your personal side and instead of doing other business cycles at the end of the year. It doesn’t matter your tax and all one of the same.
Now there are some serious advantages to having your LLC elected to be taxed as a corporation, like an S corporation. But I can’t cover all of that in this video. But that’s actually how you can make it so that your tax, the lower level, you’re not taxed as high with like payroll taxes and all that stuff as a sole proprietorship or an LLC. But that’s a separate video I’ll have to create if you guys want to see a little bit more on how to save some money on corporations and electing as an escort. Make sure you comment down below. So now you know how to pay yourself as a single member LLC. But do you know how to actually make it so that you’re automating your entire company and you’re taking in cash every single day on autopilot?
I wouldn’t advise you to a free trading that I created. That is exactly how I scale two businesses to seven figures in under two years. And I did that leveraging stuff like automation, elimination and delegation. I talk a little bit about my journey, how I got to where I am today, but I don’t really, really in-depth on the exact business structures, the exact service models and the lead generation techniques. I was able to create so that when I was sleeping, when I was traveling, I was still producing money and profit for my company.
So be sure to click down on the link below and get access to that as soon as possible. And also if you guys got value out of this. If you’d like to learn a little bit more about, you know, quote, entities structure, how you should pay yourself. Automation, delegation elimination, almost all things business. Please, please, please make sure to like this video common down below. What else you want to hear? Common Double-O Any questions you have about LLC or entity structure emissions described this channel so that I can send out more valuable videos to you guys every single day. Thanks for your time and I’ll see you guys in the comments.