An owner's draw allows you to withdraw money from your LLC's business bank account whenever needed. The amount you draw reduces your ownership equity in the business. This method treats you as a business owner, not an employee.
Tax treatment: Draws are not taxable events themselves — you pay taxes on the LLC's total profits regardless of how much you actually withdraw. In Arizona, you'll owe federal self-employment tax (15.3%) on the profits plus Arizona state income tax ranging from 2.59% to 4.5% depending on your income level.
How to do it
Open a separate business checking account for your Arizona LLC
Transfer money from the business account to your personal account and label it as an 'owner's draw'
Record each draw in your accounting system with the date, amount, and purpose
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Guaranteed Payment
Guaranteed payments are predetermined amounts paid to LLC members for services rendered, regardless of the LLC's profitability. These payments are treated as business expenses for the LLC and ordinary income for the recipient. They're similar to salaries but don't require payroll tax withholding.
Tax treatment: Recipients pay self-employment tax (15.3%) on guaranteed payments plus Arizona income tax at rates from 2.59% to 4.5%. The LLC deducts guaranteed payments as business expenses, reducing the remaining profits subject to taxation.
How to do it
Document guaranteed payment amounts and schedules in your LLC operating agreement
Set up regular transfers from the business account to members' personal accounts
Issue Schedule K-1s to members showing their guaranteed payments and remaining profit distributions
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Salary via S-Corp Election
By electing S-Corporation tax treatment, your LLC can pay you a W-2 salary subject to payroll taxes, while additional profits pass through as distributions not subject to self-employment tax. This requires running payroll and following employment tax obligations.
Tax treatment: Your salary is subject to payroll taxes (15.3% split between employer and employee), while profit distributions above your salary avoid self-employment tax. Arizona taxes both salary and distributions as regular income at rates from 2.59% to 4.5%.
How to do it
File Form 2553 with the IRS to elect S-Corp tax treatment for your Arizona LLC
Set up payroll processing to pay yourself a reasonable salary with proper tax withholdings
Take additional profits as distributions after paying your regular salary
Arizona Tax Notes for LLC Owners
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Income Tax
Arizona imposes state income tax on LLC owners' share of profits at rates ranging from 2.59% to 4.5% depending on income level. LLC income passes through to owners' personal tax returns.
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Self-Employment Tax
Arizona LLC owners must pay federal self-employment tax at 15.3% on their share of LLC profits, regardless of how much they actually withdraw from the business.
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Estimated Taxes
Arizona LLC owners must pay quarterly estimated taxes if they expect to owe $1,000 or more in state taxes, plus federal estimated taxes if owing $1,000 or more. Payments are due January 15, April 15, June 15, and September 15.
Common Mistakes to Avoid
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Mixing personal and business expenses by using the business account for personal purchases instead of taking proper draws
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Failing to pay quarterly estimated taxes on LLC profits, resulting in penalties and interest from both Arizona and the IRS
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Not documenting owner's draws or guaranteed payments in writing, creating tax complications and potential audit issues
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Paying yourself too much during lean periods or too little during profitable periods, creating unnecessary cash flow problems