How can I pay myself from my single-member, LLC (State of Texas)?

Question

I recently started my own single-member LLC company in the state of Texas and need to begin paying myself a salary. I realize there are all sorts of taxes and such I need to take out but I don’t know how and how much. Does anyone have (or can anyone point me to) information on how to pay myself a monthly salary via my single-member LLC subject to the terms of the state of Texas?

More specifically:
* What taxes and other fees need to be taken out, what percentages, and how do I take them out?
* How do I pay the respective taxes to where they’re owed, and how often?
* Must I pay myself a consistent salary or can it flex +- a couple thousand each month?

Many thanks for your help!

--Dan

Answer 1

I faced that same situation and realized that the $50 or so a month that you pay a place like ADP to do all the paperwork, file the tax forms, send in tax payments, cut checks for you, and send you W2 forms and year end summaries is a good deal.

I found that when I did it myself I was spending a lot of time unproductively doing clerical work and that made the use of a company like ADP very cost-effective. Plus if anything goes wrong they just whip out their paperwork and show the IRS that all was done properly. Doing that on your own is a major headache..

Answer 2

It all depends on how you choose to report to the IRS.

With an LLC, you can take an officer's salary (which can vary) since you are the principal owner of the entity. On your personal returns (PTR), the taxes taken out will reflect federal & state income taxes since you will essemtially be issuing your self with a W-2. If you take any distribuitions from the business, it will be filed as K-1 income and is taxed accordingly.

However, if you elect to report to the IRS as a sole proprietor, I believe (pls. verify with a CPA) that you will take 1099 income and also be allowed to pass thru any business losses thru your PTR so that you pay less in taxes. I don't think you will be subject to a self-employment tax but you should find out. So you will be taxed only once versus twice (business and personal) if you elect to reports as an LLC.

But, pls. talk to a CPA because tax laws change so frequently taht professional assistance is always advisable.