You withdraw money directly from your LLC's business account to your personal account. This method treats the withdrawal as a distribution of profits rather than wages. There's no set schedule—you can take draws whenever your LLC has available cash flow.
Tax treatment: Owner's draws are not subject to payroll taxes, but the entire LLC profit is subject to self-employment tax (15.3%) regardless of how much you actually withdraw. In Arkansas, you'll also pay state income tax on your share of LLC profits at rates ranging from 0.9% to 5.9%. The LLC itself doesn't pay taxes—profits pass through to your personal tax return.
How to do it
Transfer money from your LLC business account to your personal account
Record the transaction in your accounting system as an owner's draw or distribution
Set aside funds for quarterly estimated taxes on your share of LLC profits
2
Guaranteed Payment
The LLC pays you a fixed amount regardless of whether the business is profitable that period. These payments are treated as business expenses for the LLC and must be documented in your operating agreement. Guaranteed payments ensure consistent income while allowing for additional profit distributions later.
Tax treatment: Guaranteed payments are subject to self-employment tax (15.3%) and Arkansas state income tax (0.9% to 5.9%). The LLC can deduct guaranteed payments as business expenses, reducing the overall taxable profit. You must report guaranteed payments as income on Schedule SE and pay quarterly estimated taxes.
How to do it
Document guaranteed payment terms in your LLC operating agreement or partnership agreement
Set up regular payments from the LLC business account with proper payroll documentation
Report guaranteed payments on Schedule K-1 and pay self-employment tax on the amounts received
3
Salary via S-Corp Election
Your LLC elects S-Corporation tax treatment with the IRS, allowing you to become an employee of your own business. You must pay yourself a reasonable salary subject to payroll taxes, then take additional distributions that avoid self-employment tax. This hybrid approach can significantly reduce your overall tax burden.
Tax treatment: Your salary is subject to payroll taxes (15.3% split between you and the LLC) and Arkansas income tax withholding. Distributions above your salary avoid self-employment tax but are still subject to Arkansas state income tax (0.9% to 5.9%). You must file both federal and Arkansas S-Corp returns in addition to your personal returns.
How to do it
File Form 2553 to elect S-Corporation status and register for Arkansas S-Corp requirements
Set up payroll to pay yourself a reasonable salary with proper tax withholdings
Take additional profits as distributions that avoid self-employment tax while maintaining proper documentation
Arkansas Tax Notes for LLC Owners
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Income Tax
Arkansas imposes state income tax on LLC owners' share of profits at rates from 0.9% to 5.9%, with a standard deduction of $2,340 for single filers and $4,680 for married filing jointly in 2026.
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Self-Employment Tax
Arkansas LLC owners must pay federal self-employment tax (15.3%) on their share of LLC profits, but Arkansas does not impose additional state self-employment taxes beyond the regular income tax.
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Estimated Taxes
Arkansas LLC owners must make quarterly estimated tax payments if they expect to owe $1,000 or more in state taxes, with payments due January 15, April 15, June 15, and September 15, plus federal estimated taxes if owing $1,000 or more.
Common Mistakes to Avoid
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Mixing personal and business funds by using business accounts for personal expenses or failing to properly document owner's draws
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Not paying quarterly estimated taxes on LLC profits, leading to penalties and interest from both Arkansas and the IRS
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Failing to document draws and payments properly, making it difficult to track basis and comply with tax reporting requirements
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Over-paying yourself when the LLC lacks sufficient cash flow or under-paying when you need to show reasonable compensation for S-Corp elections