You transfer money from your business bank account to your personal account whenever needed. The LLC doesn't deduct this as a business expense, and you're not technically an employee. This is simply withdrawing your share of the LLC's profits.
Tax treatment: Owner's draws aren't taxable events themselves. You pay taxes on the LLC's entire net profit whether you take draws or not. In New Mexico, you'll pay the state income tax rate of 1.5% to 5.9% on LLC profits plus federal self-employment tax of 15.3%. New Mexico follows federal tax treatment for LLC income.
How to do it
Ensure your LLC has sufficient cash flow and retained earnings to cover the draw amount
Transfer money from your business bank account to your personal account using online banking or by writing yourself a check
Record the transaction in your accounting system as an owner's draw, not as a business expense
2
Guaranteed Payment
The LLC makes regular payments to members for their services, similar to a salary. These payments are guaranteed regardless of whether the LLC is profitable. The LLC can deduct guaranteed payments as business expenses, reducing the overall taxable income.
Tax treatment: Guaranteed payments are subject to self-employment tax and are taxable to the recipient member. In New Mexico, you'll pay state income tax at rates from 1.5% to 5.9% on guaranteed payments. The LLC deducts these payments, reducing its taxable income distributed to all members.
How to do it
Document guaranteed payment amounts and schedules in your LLC operating agreement
Set up regular payment transfers from the LLC business account to the recipient member's personal account
Report guaranteed payments on your personal tax return and the LLC's tax return, ensuring the LLC deducts them as business expenses
3
Salary via S-Corp Election
Your LLC elects to be taxed as an S-Corporation with the IRS. You become an employee and must pay yourself a reasonable salary with payroll taxes. Additional profits can be distributed to you as an owner without self-employment tax.
Tax treatment: Your salary is subject to payroll taxes and New Mexico state income tax withholding. Distributions above your salary avoid the 15.3% self-employment tax but are still subject to New Mexico income tax. You must pay yourself a reasonable salary based on industry standards for your role.
How to do it
File Form 2553 with the IRS to elect S-Corp taxation and register with New Mexico Taxation and Revenue Department for payroll tax purposes
Set up payroll to pay yourself a reasonable salary with proper tax withholdings and file quarterly payroll tax returns
Take additional distributions through regular transfers from business to personal accounts, ensuring total compensation remains reasonable
New Mexico Tax Notes for LLC Owners
Income Tax
New Mexico imposes state income tax on LLC profits at rates ranging from 1.5% to 5.9% depending on income level. LLC income passes through to your personal tax return and is taxed at these graduated rates.
Self-Employment Tax
New Mexico LLC owners must pay federal self-employment tax of 15.3% on LLC profits, but New Mexico doesn't impose an additional state-level self-employment tax. The SE tax applies to your entire share of LLC profits regardless of whether you take distributions.
Estimated Taxes
If New Mexico taxes this income, it sets its own rules for estimated payments, so check the current threshold and due dates with New Mexico's tax agency. Because nothing is withheld from a draw, you generally make federal estimated payments with Form 1040-ES; the IRS sets four due dates a year and the threshold for owing them, both listed in the form's instructions.
Common Mistakes to Avoid
Mixing personal and business expenses by using the business account for personal purchases instead of taking proper owner's draws
Failing to make quarterly estimated tax payments to New Mexico and the IRS, resulting in penalties and interest charges
Not properly documenting owner's draws and guaranteed payments in your accounting records, creating problems during tax preparation
Either taking too little money and creating personal financial stress or taking too much and leaving the LLC without adequate working capital
This guide is general information, not legal or tax advice, and reading it does not create an attorney-client relationship. It reports what each state publishes about filing deadlines, fees, and the consequences of missing them, with the sources this page cites. It cannot tell you what your own company owes: the date turns on when and where you formed, states change these rules between our reviews, and in several states an entity-level tax falls due in a year when no report does. Confirm your own dates with the filing office named on this page before you rely on one here, because missing a deadline can cost the company its good standing or, in many states, its existence.
Frequently Asked Questions
You choose the timing. Federal tax law does not limit how often an LLC owner takes a draw, although an operating agreement with more than one member may set its own rules for distributions. Leave room for New Mexico income tax too: New Mexico taxes your share of the profit on your personal return at rates from 1.5% to 5.9% for 2026, and its tax agency sets its own rules for estimated payments. Tie the timing to your cash flow rather than the calendar: a draw that leaves the business short of cash for its bills or its taxes causes more trouble than it solves. Once an S-corporation election is in effect, a regular payroll salary replaces some of the draws, and any distribution is recorded apart from the wages. Every transfer belongs in the books under the right name so the tax returns line up with it.
No. Payroll taxes apply to wages, and a draw from a single-member LLC or an LLC taxed as a partnership is not wages, so none are withheld. Self-employment tax covers the same Social Security and Medicare ground for owners. It is based on your share of the LLC's net profit, not on your draws, and it goes on Schedule SE. On the state side, your share of the profit is also taxed on your New Mexico return at rates from 1.5% to 5.9% for 2026, and New Mexico's tax agency can tell you whether it wants estimated payments during the year. Owners usually cover it with quarterly estimated payments. Wages are a different matter: if the LLC elects to be taxed as an S corporation, the salary it pays you goes through payroll with the usual payroll taxes.
The right amount is whatever the business can release without running short. Work it out from the cash on hand after bills, the tax the profit will bring and a reserve for slow months. Because you are taxed on your share of the profit even if you leave it in the business, the tax money has to come from somewhere; put it aside before you decide on a draw. With an S-corporation election in place, part of what you take has to be a reasonable salary paid through payroll. How much is reasonable depends on your role and your industry, and a tax professional can help you set it. New Mexico also taxes your share of the profit on your personal return, at rates from 1.5% to 5.9% for 2026, so include that in what you set aside.
Log each payment you take from the LLC with its date and amount, the account it left, and what kind of payment it was: a draw, a guaranteed payment or wages. Back each entry with the bank statement that shows it. Keep your operating agreement's terms on distributions and guaranteed payments with the file, and the payroll records too if the LLC is taxed as an S corporation. Your accountant can tell you how long the IRS and New Mexico's tax agency may ask to see them. Running the LLC's money through its own account keeps these records clean and lets your returns tie back to real transfers.
What the election changes is federal tax treatment. You are paid a reasonable salary through payroll, with payroll taxes on it, and profit you take out beyond that salary is not subject to self-employment tax. Against that, the election adds running payroll, a separate federal S-corporation return and an accountant's fee. The answer depends on your own figures: the profit, a reasonable salary for your role and the extra costs. A tax professional can compare them before you file Form 2553. New Mexico's tax agency can tell you how New Mexico treats an S corporation and its owners.
Tax law does not stop you. A draw taken before the LLC makes a profit is generally a return of money you have put in rather than income in itself. Check with New Mexico what, if anything, the LLC owes the state each year, since a charge that does not depend on profit still needs cash. A draw leaves less cash to run the business, so check what the LLC needs for its bills first. A profitable year brings tax on your share however much you drew and whenever you drew it. The operating agreement may limit distributions, and taking out more than you have put in is a point to raise with a tax professional first.
Sources
2 documentsShowHide
Each entry below is a document recorded in our verified New Mexico sources, and each entry says what the document is. Some statutory text is read from an accurate mirror rather than from the state's own host, and those say so.
See how Northwest Registered Agent, Bizee, ZenBusiness and LegalZoom, the formation services we partner with, compare on 3-year cost, BBB rating and Trustpilot score before you choose.
Edmond Hui is a software engineer and serial entrepreneur based in New York who has founded multiple online businesses across e-commerce, media, and information publishing. Before transitioning into tech, he spent years as a commercial real estate professional closing deals totaling over 100,000 square feet, giving him firsthand experience with business formation and entity structuring. He built MyStateLLC to provide the free, state-specific LLC guidance he wished existed when forming his own companies.
