As a small business owner, it’s important to know the proper steps for paying yourself from your LLC. Knowing the regulations of your state is key when it comes to properly paying yourself as an LLC owner. If you are starting or already own an LLC in Kentucky this 2023, here is a step by step guide on how to pay yourself in the most compliant and accurate way possible.
First: Establish a Business Bank Account
The first thing you should do when setting up your LLC is establish a separate business bank account. This ensures that all transactions are recorded accurately and that any personal expenses are separated from business ones. Having a separate bank account also makes filing taxes easier and helps protect you against any potential legal issues.
Next: Determine Your Salary
Once you have established a business bank account, the next step is to determine how much you will pay yourself. It’s important to note that the IRS considers payments made from an LLC to its owners as distributions rather than wages or salary, so make sure that you are familiar with the tax implications of these payments before proceeding. For example, if you pay yourself more than $600 annually, then you must report it on a 1099-MISC form as self-employment income.
Lastly: Make Regular Withdrawals
Once you have determined how much money you will pay yourself, it’s time to make regular withdrawals from your business bank account. You can do this either via check or electronic transfer depending on your preference and comfort level. Make sure that all withdrawals are recorded accurately as they will be needed when filing taxes at the end of the year. Additionally, remember to keep track of any other expenses such as rent, utilities, supplies etc so that they can be deducted at tax time for further savings.
Paying yourself from an LLC can seem daunting but by following these steps carefully, anyone in Kentucky this 2023 can ensure that they remain compliant with IRS regulations and maximize their earnings potential. Remember to stay organized throughout the process and consult with an accountant if necessary for further guidance during tax season! With careful planning and preparation, anyone can become successful in their own small business venture! Good luck!