You withdraw money directly from your LLC's bank account as needed throughout the year. This isn't technically a salary—you're taking a distribution of the business profits and your initial investment. The amount you can draw is limited by your ownership percentage and available cash flow.
Tax treatment: Owner's draws aren't subject to payroll taxes, but you'll pay self-employment tax on your share of the LLC's net earnings regardless of how much you actually withdraw. In Missouri, you'll also pay state income tax on your distributive share of LLC profits at rates ranging from 1.5% to 5.3%. All LLC income flows through to your personal tax return.
How to do it
Transfer money from your LLC business account to your personal account, clearly labeling it as an owner's draw
Record the transaction in your accounting software with the date, amount, and purpose
Set aside approximately 25-30% of your draws for federal self-employment tax and Missouri state income taxes
2
Guaranteed Payment
The LLC makes regular payments to you for services rendered, similar to a salary but without payroll tax withholdings. These payments are guaranteed regardless of the LLC's profitability and are treated as business expenses for the LLC. You'll receive a Schedule K-1 showing both your guaranteed payments and your share of any remaining profits or losses.
Tax treatment: Guaranteed payments are subject to self-employment tax and must be reported as income on your personal tax return. The LLC can deduct these payments as a business expense, reducing the overall taxable income of the business. In Missouri, guaranteed payments are subject to state income tax at your applicable rate, and you'll need to make quarterly estimated payments.
How to do it
Document the guaranteed payment arrangement in your LLC operating agreement with specific amounts and payment schedule
Set up recurring payments from the LLC bank account and classify them as guaranteed payments in your books
Report guaranteed payments on Schedule SE for self-employment tax and include them in your quarterly estimated tax payments to Missouri
3
Salary via S-Corp Election
Your LLC elects to be taxed as an S-Corporation by filing Form 2553 with the IRS. As an owner-employee, you must pay yourself a reasonable salary subject to payroll taxes, then you can take additional distributions that are only subject to income tax, not self-employment tax. This creates potential self-employment tax savings on the distribution portion.
Tax treatment: Your salary is subject to Social Security, Medicare, and unemployment taxes, with both employer and employee portions paid by the LLC. Distributions above your salary are subject to federal and Missouri income tax but not self-employment tax. Missouri follows federal S-Corp tax treatment, so distributions generally aren't subject to Missouri's additional taxes beyond regular income tax rates.
How to do it
File Form 2553 with the IRS to elect S-Corporation tax status and register for Missouri payroll taxes with the Department of Revenue
Set up payroll processing to pay yourself a reasonable salary with proper tax withholdings and file required employment tax returns
Take additional distributions beyond your salary through regular transfers, ensuring you maintain proper documentation for both salary and distribution payments
Missouri Tax Notes for LLC Owners
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Income Tax
Missouri taxes LLC owner income at rates from 1.5% to 5.3% depending on income level. LLC income flows through to owners' personal returns, and Missouri generally follows federal tax treatment for LLCs.
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Self-Employment Tax
Missouri LLC owners pay federal self-employment tax (15.3%) on their share of LLC net earnings, regardless of actual distributions taken. Missouri doesn't impose additional self-employment taxes beyond federal requirements.
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Estimated Taxes
Missouri LLC owners must make quarterly estimated tax payments if they expect to owe $500 or more in Missouri taxes. Federal quarterly payments are required if you expect to owe $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 funds by using business accounts for personal expenses instead of taking proper owner's draws
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Failing to make quarterly estimated tax payments to both the IRS and Missouri Department of Revenue, resulting in penalties and interest
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Not properly documenting owner's draws and guaranteed payments, which can create problems during tax audits or when applying for business loans
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Taking excessive draws that exceed the LLC's cash flow or paying yourself too little and missing opportunities for tax optimization