How to Pay Yourself in a Florida Limited Liability Company

How to Pay Yourself in a Florida Limited Liability Company

Updated: May 23, 2023

So, you’ve finally formed your limited liability company down here in Florida – congratulations! However, unless you’re a secret billionaire, then chances are that you’re still going to need some form of income. Here’s how you can pay yourself through your Florida LLC. The right method for you will depend on how your LLC is taxed – as a sole proprietor, as a partnership, or as an s-corporation. Feel free to reach out to us if you need help figuring out how to pay yourself in a Florida LLC.

How to Pay Yourself in a Florida LLC Taxed as a Sole Proprietor

To pay yourself in a Florida LLC taxed as a sole proprietor, your income comes directly from the business’s annual profits. You’ll simply send the funds from your business’s bank account to your personal bank account. This action is known as making a distribution.

Distributions can be done in one of two ways. Your first option is to pay yourself in one lump sum at the end of the year. Your second option is to take staggered payments based on the Florida LLC’s expected annual profits. Those payments will be deducted from the company’s actual profits at the end of the year.

If your Florida LLC is taxed as a sole proprietor, then you will not be able to pay yourself a salary in addition to receiving distributions.

How to Pay Yourself in a Florida LLC Taxed as a Partnership

Florida LLCs that are taxed as partnerships also make distributions to their members. When you pay yourself in this type of LLC, however, those profits will be shared with the company’s other members. Just how much everyone receives is determined by their distribution rights.

Distribution rights are specified by the Florida LLC’s operating agreement. Frequently, a member’s share of the profits is tied to their interest in the company, but there are many other ways that the members can decide to split the profits. If you’re unsure of your own distribution rights, be sure to refer to the operating agreement before you pay yourself to make sure you’re getting your fair share.

If your Florida LLC is taxed as a partnership, then you will not be able to pay yourself a salary in addition to receiving distributions.

How to Pay Yourself in a Florida LLC Taxed as an S Corporation

If your Florida LLC is taxed as an S corporation, then you have some additional flexibility when deciding how to pay yourself. You can take deductions from the company’s profits, receive a salary from the company, or you can use a combination of the first two options under certain conditions.

Before you can pay yourself using a combination of both deductions and salary, you need to ensure that salary is considered reasonable by the IRS. This means that your salary must be within the norms of your industry. Some business owners use a 60/40 rule to determine their salary, with 60% of their business income coming from their salary and 40% from their distributions. Others play it even safer and split it evenly. 

Paying yourself a reasonable salary is essential to protecting both yourself and your business from the wrath of the IRS and other unwanted consequences. For help with figuring out a reasonable salary-to-distribution ratio for your unique circumstances, schedule a time to speak with our corporate attorney about how to pay yourself in your Florida LLC.

When launching a Florida LLC, it’s crucial that you have a solid foundation that will encourage growth. As a firm of entrepreneurs ourselves, we know how to start businesses off the right way. Hiring an attorney reduces the chance that your company will run into trouble down the line.

We work hard to equip you with the information and documents that you need for success. For assistance with starting your business or growing the one that you already have, visit our Service Page or contact us by calling (727) 279-5037.

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