Paying yourself

[regulus]

I've been selling used books on Amazon and made a small profit. I get all of my payments thorugh an electronic check to my LLC's account. I haven't made much money yet but eventually I will be making enough to pay myself. How do I handle the accounting? I want to keep business and persnal mney seperate. Is it even an issue since I'm the only employee. I was told that LLC tax filings are just like when you do a DBA but I'm not sure.

 

[Temujin]

You definetly want to keep your accounting seperate. If you don't have an accounting program for your LLC quickbooks is great quicken is also good for small companies. If not go the cheap route and just use an excell spreadsheet to keep track of your revenues and expenses. The reason you are going to want to keep them seperate is because at the end of the year you will have to file seperate tax documents and keeping them seperate will help with that. Though you do not have to pay federal taxes on profits of the LLC you do have to file a form 1065 which is a general information form.

LLC's profit and loss pass on to the members personal taxes. Because of this you will have to file a schedule C with your personal tax return because you are the only member. The thing you want to find out is if your payments to yourself are considered pay to an employee or distribution of profit to an owner. Generally only passive members of an LLC can receive profit distributions without paying self-employment taxes. Because you are the only employee I doubt very highly you can consider these distributions passive distributions.

If they are considered pay to an employee you will have to deduct self-employment taxes (social security and medicare) if they are considered profit distributions you will not have to keep track and deduct these however when you report the income on your personal taxes know you will have to end up paying taxes on this money because no taxes have been deducted.
Note: even if you pay self-employment taxes on the company level you still will be subject to income taxes for the money on a personal level.

I know this sounds like a lot unless you are familar with these type of taxes. Even if you are I would suggest getting an accounting program. Quickbooks or quicken will be able to calculate these taxes for you rather easily.

So if I were you I would hold about 12% of the profit you receive from your LLC to pay taxes. Depending on your tax bracket that may be higher because you will also have to consider the added income taxes you will owe personally at the end of the year.

Hope this helps.

 

[Carnmealpop]

Excellent question:
I am in the same situation. I run a small computer company also. And i need to do the same. I bought quicken for windows 7 months ago, but I got rid of my windows machine to use only Macs. Which now I am mad for spending money on it.

Does anyone have Quicken for Mac 06 program?

Let me know.