The Short Answer
Single-member LLC: pay yourself through an owner's draw — transfer money from business to personal account anytime. S-Corp LLC: you must run a formal payroll salary. The IRS watches this closely. Here's how to do both correctly.
First: Do You Have a Business Bank Account?
Before you can pay yourself correctly, your business and personal money must be completely separated. If you're mixing them, stop immediately. Open a business checking account — most banks offer free business accounts. Your LLC's money lives there. Your personal money lives in your personal account. You transfer between them. That's it.
Why this matters: Mixing personal and business funds is called "piercing the corporate veil" and it can void your LLC's liability protection. A judge can rule that you and your business are the same entity — and suddenly your personal assets are exposed to business lawsuits.
Two Ways to Pay Yourself — Which One Applies to You
Owner's Draw (Default LLC)
- Transfer any amount from business to personal account
- No payroll taxes withheld at time of transfer
- You pay self-employment tax (15.3%) quarterly
- No paperwork required per payment
- Best when earning under $40K/year from the business
Salary + Dividends (S-Corp LLC)
- Pay yourself a "reasonable salary" via formal payroll
- Taxes withheld automatically each paycheck
- Remaining profit taken as owner distribution
- Saves $3K–8K/year in self-employment tax at scale
- Best when earning over $40K/year from the business
How to Do an Owner's Draw (Step by Step)
Log into your business bank account
This is the account where all client payments, sales, and business income lands.
Transfer money to your personal account
This is your "paycheck." You decide the amount and frequency. Weekly, monthly, whenever — it's your business.
Set aside 25–30% for taxes
You're responsible for your own taxes as an LLC owner. Every time you take a draw, immediately move 25–30% of it into a savings account earmarked for taxes. Do not touch it.
Pay quarterly estimated taxes
The IRS expects you to pay taxes four times per year — April, June, September, and January. Missing these triggers penalties. See our LLC tax guide for exact due dates and amounts.
The S-Corp Salary Problem
If your LLC is taxed as an S-Corp (which saves money at higher income levels), the IRS requires you to pay yourself a "reasonable compensation" salary before taking any distributions. This means setting up actual payroll — withholding federal income tax, Social Security, and Medicare from each paycheck, and filing payroll tax returns quarterly.
Doing this manually is genuinely complicated. This is exactly where Gusto earns its fee — it automates every part of small business payroll, calculates withholdings, files quarterly payroll taxes automatically, and sends you and your employees W-2s at year end. For an S-Corp LLC owner, it's not optional — it's what keeps you IRS-compliant without a full-time accountant.
The S-Corp math: If your LLC earns $80,000/year and you take it all as owner's draw, you pay 15.3% self-employment tax on all $80K = $12,240. If you elect S-Corp, pay yourself a $45,000 salary and take $35,000 as distribution, you only pay payroll taxes on the $45K = $6,885. You just saved $5,355/year. Gusto costs $46/month = $552/year. Net savings: $4,803.
There's no legal requirement. Most solo LLC owners pay themselves monthly or bi-weekly to create a consistent personal budget. The key is maintaining enough cash in the business account to cover expenses and quarterly taxes.
Not if you're taking owner's draws under a standard LLC tax structure. You do need payroll software if your LLC is taxed as an S-Corp — the IRS requires formal payroll records for the salary portion of your compensation.
For a standard LLC, there's no "too much" — you can take all the profit if you want. For an S-Corp, taking too little salary (and too much distribution to avoid payroll taxes) is an IRS audit red flag. The IRS will reclassify distributions as salary and hit you with back taxes and penalties.
Automate Your LLC Payroll with Gusto
Gusto handles payroll, tax filings, W-2s, and compliance automatically — starting at $46/month. For S-Corp LLC owners, it pays for itself in tax savings many times over.
Start with Gusto →Affiliate disclosure: The Money Minute earns a commission if you use this link. Our recommendation is based on research and not influenced by this relationship.