Can my employer pay me through my LLC? (2024)

Being paid through an LLC can be an option for some types of employees when working with businesses, and can have its advantages.

However, there are some considerations to bear in mind before opting to be paid through an LLC, including looking at other financial solutions such as Wise Business.

This article will look at the different ways to be paid in an LLC, the benefits of doing so, and how to pay yourself as part of an LLC.

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Table of Contents
Getting paid in an LLC Are there benefits to have an LLC taxed as a corporation? How to pay yourself as part of an LLC Can my employer pay me through my LLC?: FAQ

Getting paid in an LLC

An LLC refers to a Limited Liability Company, which can be a method of operating your business. Generally, getting paid in an LLC will mean that the owner (or owners) will receive payment for their services through the company.¹

The payment can come in the form of a salary or profit distribution. Generally, if you are a salaried employee receiving a W-2 from your place of employment, your employer will not be able to pay you through an LLC. This is because W2 employees receive wages, while LLC owners receive income from the business.²

However, if you provide support or services to businesses, there are some benefits to forming an LLC and having your clients pay through an LLC. If you are an independent contractor or freelancer working with different kinds of businesses, an LLC could be the right business choice for you.

Once you set up an LLC, though, the next step is deciding the form of payment from it. Getting paid in an LLC will also vary depending on its structure and whether the business operates as a multi-member LLC or a single-member LLC.

Getting paid as a multi-member LLC

As a multi-member LLC, a few different payment options are available. For example, you can pay yourself a salary, receive a distribution, or combine the two through a capital account.¹

However, because there are multiple members involved in the LLC, it is crucial to document the payment structure and sign an agreement to ensure that everyone is on the same page and agrees.

Tax requirements for a multi-member LLC

Multi-member LLCs can be taxed as a partnership or a corporation. For partnerships, standard tax rules apply, as each member will individually pay taxes on the income they receive from the LLC. Corporations file and pay their own tax returns based on profits generated from the business.

Getting paid as a single-member LLC

For single-member LLCs, there are two choices for payment: Either through a business bank account, which is recommended, or a personal account. Similar to a multi-member LLC, options are available, as you can either pay yourself a salary or take distributions as an owner’s draw.

Tax requirements for a single-member LLC

Single-member LLCs are treated similarly to independent contractors for tax purposes, meaning you must report all business income and expenses on a personal tax return.¹ Incorporation may also be an option, but it may not be feasible depending on the LLC, so it is essential to consult with a tax professional before deciding how to classify the LLC.

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Are there benefits to having an LLC taxed as a corporation?

Having your LLC taxed as a corporation can have some benefits but it will depend on the nature of the business.

The main benefit of having LLCs taxed as corporations is that certain types of tax deductions may be available.¹ In addition, corporations may also be taxed at a lowered rate depending on the income, which can help reduce the overall tax liability.

How to pay yourself as part of an LLC

There are a few payment methods for LLC owners, depending on the business structure and set up. You can choose to take a draw of the profits, receive guaranteed payments, or set up a monthly salary. You should always consult with a tax professional before deciding. Their advice will ensure you are making the best choice based on your financial circumstances and goals.

Pay yourself a reasonable monthly salary.

As part of an LLC, you can pay yourself a monthly salary from the income the LLC makes. A monthly salary can be useful if you are seeking a stable income and a way to manage business finances effectively. By paying yourself a salary, you can plan cash flow better with the remaining profit and cover any potential expenses that may arise, while also positioning the LLC to be more financially stable moving forward.

If you do decide to pay yourself a salary, you will need to consider tax withholding and payroll operations, similar to how it would be for a W-2 employee working for a business.

Work as an independent contractor

Another option is to work as an independent contractor, you can form a business and receive payments through your LLC. As an independent contractor, your LLC will operate similarly to a sole proprietorship, and you can receive money in a business account to manage finances.³ Working as an independent contractor can be beneficial for a variety of reasons and provide some flexibility while still having a structured business.

Choose not to receive payments

You can also choose to structure your LLC so that you do not receive payments and instead keep any profits the LLC generates within the LLC.⁴ However, it is essential to note that even if you do decide to keep profits within the LLC, there will still be income tax implications on your personal tax return based on the profits generated.

Receive dividend payments on an annual basis

Some LLCs are structured so that there are no monthly payments or salaries. Instead, you receive dividend payments on an annual basis from the LLC. The LLC may choose to reinvest profits back into the business and fund its growth, with dividend payouts coming from any profits the business generates.

However, if the LLC does divide to forego payments for dividends, ensuring there is profit to distribute annually is crucial, which means more extensive financial planning may be needed.

Get paid through Wise Business and save

If you are seeking a way to manage your LLC finances effectively, solutions like Wise Business could be the right fit for you.

Wise Business offers a variety of tools to help you manage and plan business finance, including a dedicated business card, tools for cash flow management, and competitive mid-market rates for international currency transfers.

Wise Business is specially designed for sole proprietors and LLCs looking to take control of their business finances and has a suite of features to make business finance management much easier. Wise Business also includes tools, such as invoice management, batch payments, and more to make sending and receiving payments easier.

Wise Business also integrates with tools such as QuickBooks, Xero, Sage, and Wave for sole proprietors seeking one solution for comprehensive financial management.

One of the biggest advantages: Wise Business offers tools to streamline sending and receiving international payments. Sole proprietors can receive money in up to 10 currencies free after paying a one-time fee. This feature helps LLCs to bank more easily by providing local account details for easy payment management across different countries. Plus, Wise has competitive mid-market rates when converting to different currencies to make currency conversion more cost-effective.

Let’s learn about Wise Business fees.

Fee Type	Wise Business Transparent Fees
Monthly fees	No
Opening balance requirement	No
Opening cost on US account	No (Price in other locales may vary)
Sending money across currencies	From 0.41%
Receive money across currencies	One-time fee to receive in 10 major currencies (USD, EUR, GBP, CAD, AUD, and more) without the currency conversion costs

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Can my employer pay me through my LLC?: FAQ

Here is a list of frequently asked questions related to paying yourself through your LLC.

How to start an LLC

You can start an LLC by filing articles of organization in the state where you plan to operate your business, including basic details about the business (e.g., name, address) and the purpose for starting the LLC.⁵ You must also ensure that your business name complies with any state naming requirements and create an operating agreement outlining the business structure and company management.

Can an LLC be an employee of a corporation?

There are some instances where an LLC can be an employee of a corporation. For example, corporations may choose to outsource specific tasks or services or need additional support in a particular business area. A corporation can hire an LLC to provide that support or service in that case.

Tax and legal implications will depend on how the LLC is set up. Independent contractors working under the umbrella of an LLC will have to manage their town taxes and expenses rather than being considered as a W2 employee receiving wages.

Can I be an employee of my LLC?

As the owner of your LLC, you can choose to classify yourself as an employee and pay yourself a monthly salary.

However, if you do decide to be an employee of your own LLC, you will need to consider the impact of payroll taxes and any relevant employment laws depending on where the LLC operates. You can also choose to forego a monthly salary and instead take profits from the LLC as a distribution, but again, it will depend on your LLC and financial circumstances.

Learn more:

How to Pay a Freelancer: Best Tips and Payment Options (2023)

How are contractors paid: 3 Methods and 13 Sites to Use

Sole proprietor business bank account: Do you need one & How to open

How do LLC owners get paid? Tips and FAQ

Best business accounts for independent contractors (2023)

Find an account number on a business check

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Wise is not a bank, but a smart online alternative to traditional business bank accounts

Sources:

1. https://www.wolterskluwer.com/en/expert-insights/how-do-i-pay-myself-from-my-llc#:~:text=To%20get%20paid%2C%20LLC%20members,income%20that%20month%20or%20quarter.
2. https://smallbusiness.chron.com/true-owner-llc-cannot-w2-income-68199.html
3. https://www.nolo.com/legal-encyclopedia/should-an-independent-contractor-form-an-llc.html
4. https://www.legalzoom.com/articles/how-to-pay-yourself-in-an-llc
5. https://www.legalzoom.com/articles/how-to-start-an-llc-in-7-steps
6. https://www.trustpilot.com/review/wise.com