How often can I pay myself from my Tennessee LLC?

The IRS sets no schedule for owner's draws, so how often you take one is up to you and, where the LLC has more than one member, to your operating agreement. 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. Because Tennessee has no personal income tax, the estimated tax you plan your draws around is federal, though any Tennessee tax the LLC itself owes is a separate question. An LLC taxed as an S corporation works differently: your salary runs through payroll on fixed pay dates, and distributions are separate from it. Whatever the setup, label each payment in the books as a draw, a guaranteed payment or wages.

Do I pay payroll taxes on an owner's draw from my Tennessee LLC?

Not while the LLC is taxed under the default rules. A draw moves money from the business to you; it is not a paycheck, so no payroll tax is withheld from it. What you owe instead is self-employment tax, worked out on Schedule SE from your share of the LLC's net profit for the year, not from the amount you drew. Tennessee has no personal income tax, so your own share of the profit is not taxed by Tennessee on a personal return; any Tennessee tax the LLC itself owes is a separate matter. Because nothing is withheld, most owners make quarterly estimated payments to the IRS. If the LLC has elected S-corporation treatment, you are paid wages through payroll, and those wages do carry payroll taxes.

How much should I pay myself from my Tennessee LLC?

No rule fixes the figure. Start from what the LLC can spare once its bills are paid, its tax is provided for and a cash cushion is left in the account. You owe income tax and self-employment tax on your share of the profit whether or not you take it out, so set money aside for those taxes before deciding what to draw. Because Tennessee has no personal income tax, the tax you reserve on your own share of the profit is owed to the IRS. Set aside the Franchise and Excise Tax too, which an LLC under the default tax rules in Tennessee can owe to the Tennessee Department of Revenue, at least $100 a year. Tennessee's Annual Report is a cost the LLC meets whether or not it made a profit, filed with the Tennessee Secretary of State every year, with a state fee of at least $300. After an S-corporation election, the question splits in two: a reasonable salary for the work you do, paid through payroll, and distributions on top. A tax professional who knows your role, your industry and your numbers can help you set the salary.

What records should I keep for LLC payments to myself?

For each transfer to yourself, note when it happened, how much it was, which account paid it and whether it counts as a draw, a guaranteed payment or wages. Alongside that record, keep the bank statements, the sections of the operating agreement that govern distributions and guaranteed payments, and, for an LLC taxed as an S corporation, every payroll record. Even with no personal income tax in Tennessee, keep them for as long as federal tax rules call for; your accountant can say how long that is. Proof of each Franchise and Excise Tax payment the LLC makes to the Tennessee Department of Revenue belongs with them too. Running the LLC's money through its own account keeps these records clean and lets your returns tie back to real transfers.

When does S-Corp election make sense for a Tennessee LLC?

The election leaves your LLC as it is under state law and changes only how the IRS taxes it. You are then paid a reasonable salary through payroll, with payroll taxes on it, and the profit beyond the salary is not subject to self-employment tax. It also brings new costs, among them payroll processing, a yearly federal S-corporation return and professional fees for keeping both right. The federal election is not recognized for Tennessee's own taxes, so ask Tennessee's tax agency how it treats the LLC before you decide. Whether it pays off for you is a question of your numbers rather than a rule of thumb, and it is worth putting to a tax professional before Form 2553 goes to the IRS.

Can I pay myself before my Tennessee LLC becomes profitable?

Tax law allows it. Money you take out before there is any profit is generally treated as a return of what you invested, not as income on its own. First, check the cash: a draw is money the business no longer has for its bills. Keep cash for the Franchise and Excise Tax as well, which an LLC under the default tax rules in Tennessee can owe to the Tennessee Department of Revenue, at least $100 a year, profit or not. Keep cash for the Annual Report too, filed with the Tennessee Secretary of State every year, with a state fee of at least $300, profit or not. Tax follows the year's result, not the draw: a profit by year end means income tax and self-employment tax on your share. Read what your operating agreement says about distributions, and get a tax professional's view before your draws exceed what you have put in.

How to Pay Yourself from Your Tennessee LLC

Learn the three main methods to compensate yourself as a Tennessee LLC owner, plus tax implications and common mistakes to avoid.

By Edmond Hui · Last updated: October 2026

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3 Ways to Pay Yourself from Your Tennessee LLC

Owner's Draw

You simply transfer money from your business account to your personal account whenever needed. This isn't technically a salary. It's taking money from your ownership stake in the company. The amount you can draw is limited to your capital account balance and available cash flow.

Tax treatment: Draws themselves aren't taxed, but all LLC profits are subject to self-employment tax (15.3%) regardless of how much you actually withdraw. Tennessee has no individual income tax, so you pay federal income tax and self-employment tax on your share of the LLC's net earnings, while the LLC itself owes Tennessee's franchise and excise tax.

How to do it

Ensure your LLC has sufficient cash flow and your capital account can cover the withdrawal
Transfer the desired amount from your business bank account to your personal account
Record the transaction in your books as an owner's draw, not as a business expense

Guaranteed Payment

Guaranteed payments are predetermined amounts paid to LLC members for services rendered, regardless of whether the LLC is profitable. These payments are similar to salaries but are treated differently for tax purposes. The LLC can deduct guaranteed payments as a business expense.

Tax treatment: Guaranteed payments are subject to self-employment tax (15.3%) for the recipient and are deductible by the LLC. The recipient pays federal income tax on these payments, but Tennessee's lack of an individual income tax means no Tennessee income tax on them for the recipient.

How to do it

Document guaranteed payment arrangements in your LLC operating agreement
Set up regular payment schedule and process payments like you would employee salaries
Issue Schedule K-1s to members showing guaranteed payments separately from distributive share of profits

Salary via S-Corp Election

Your LLC elects to be taxed as an S-Corporation by filing Form 2553 with the IRS. You become a W-2 employee of your own company and must pay yourself a reasonable salary subject to payroll taxes. Any remaining profits can be distributed as dividends, which aren't subject to self-employment tax.

Tax treatment: Your salary is subject to payroll taxes (15.3% total between employer and employee portions), while profit distributions above your salary are only subject to federal income tax. Tennessee has no individual income tax on either wages or dividends, though the LLC owes franchise and excise tax whether or not it makes this election.

How to do it

File Form 2553 with the IRS to elect S-Corp tax treatment (must be done by March 15th or within 2 months and 15 days after a new LLC's first tax year begins)
Set up payroll system and pay yourself a reasonable salary with proper payroll tax withholdings
Distribute any remaining profits as dividends to members based on their ownership percentages

Tennessee Tax Notes for LLC Owners

Income Tax

Tennessee has no individual income tax on wages, salaries or an owner's share of LLC income. The LLC itself, however, owes Tennessee's franchise and excise tax: a 6.5% excise tax on Tennessee taxable income plus a 0.25% franchise tax on net worth, with a $100 minimum franchise tax.

Self-Employment Tax

Tennessee LLC owners must still pay federal self-employment tax (15.3%) on their share of LLC profits when the LLC is taxed as a sole proprietorship or partnership. This applies regardless of how much money you actually withdraw from the business.

Estimated Taxes

Tennessee does not tax this income on a personal return, so quarterly estimated payments go to the IRS only. 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 funds by using business accounts for personal expenses or treating owner draws as business deductions

Failing to make quarterly estimated tax payments, leading to underpayment penalties and a large tax bill at year-end

Not properly documenting owner draws and guaranteed payments, making it difficult to track capital accounts and prepare accurate tax returns

Either paying yourself too little (limiting personal cash flow) or too much (depleting business capital needed for operations and growth)

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.

Read this guide for another state:

Frequently Asked Questions

: The IRS sets no schedule for owner's draws, so how often you take one is up to you and, where the LLC has more than one member, to your operating agreement. 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. Because Tennessee has no personal income tax, the estimated tax you plan your draws around is federal, though any Tennessee tax the LLC itself owes is a separate question. An LLC taxed as an S corporation works differently: your salary runs through payroll on fixed pay dates, and distributions are separate from it. Whatever the setup, label each payment in the books as a draw, a guaranteed payment or wages.
: Not while the LLC is taxed under the default rules. A draw moves money from the business to you; it is not a paycheck, so no payroll tax is withheld from it. What you owe instead is self-employment tax, worked out on Schedule SE from your share of the LLC's net profit for the year, not from the amount you drew. Tennessee has no personal income tax, so your own share of the profit is not taxed by Tennessee on a personal return; any Tennessee tax the LLC itself owes is a separate matter. Because nothing is withheld, most owners make quarterly estimated payments to the IRS. If the LLC has elected S-corporation treatment, you are paid wages through payroll, and those wages do carry payroll taxes.
: No rule fixes the figure. Start from what the LLC can spare once its bills are paid, its tax is provided for and a cash cushion is left in the account. You owe income tax and self-employment tax on your share of the profit whether or not you take it out, so set money aside for those taxes before deciding what to draw. Because Tennessee has no personal income tax, the tax you reserve on your own share of the profit is owed to the IRS. Set aside the Franchise and Excise Tax too, which an LLC under the default tax rules in Tennessee can owe to the Tennessee Department of Revenue, at least $100 a year. Tennessee's Annual Report is a cost the LLC meets whether or not it made a profit, filed with the Tennessee Secretary of State every year, with a state fee of at least $300. After an S-corporation election, the question splits in two: a reasonable salary for the work you do, paid through payroll, and distributions on top. A tax professional who knows your role, your industry and your numbers can help you set the salary.
: For each transfer to yourself, note when it happened, how much it was, which account paid it and whether it counts as a draw, a guaranteed payment or wages. Alongside that record, keep the bank statements, the sections of the operating agreement that govern distributions and guaranteed payments, and, for an LLC taxed as an S corporation, every payroll record. Even with no personal income tax in Tennessee, keep them for as long as federal tax rules call for; your accountant can say how long that is. Proof of each Franchise and Excise Tax payment the LLC makes to the Tennessee Department of Revenue belongs with them too. Running the LLC's money through its own account keeps these records clean and lets your returns tie back to real transfers.
: The election leaves your LLC as it is under state law and changes only how the IRS taxes it. You are then paid a reasonable salary through payroll, with payroll taxes on it, and the profit beyond the salary is not subject to self-employment tax. It also brings new costs, among them payroll processing, a yearly federal S-corporation return and professional fees for keeping both right. The federal election is not recognized for Tennessee's own taxes, so ask Tennessee's tax agency how it treats the LLC before you decide. Whether it pays off for you is a question of your numbers rather than a rule of thumb, and it is worth putting to a tax professional before Form 2553 goes to the IRS.
: Tax law allows it. Money you take out before there is any profit is generally treated as a return of what you invested, not as income on its own. First, check the cash: a draw is money the business no longer has for its bills. Keep cash for the Franchise and Excise Tax as well, which an LLC under the default tax rules in Tennessee can owe to the Tennessee Department of Revenue, at least $100 a year, profit or not. Keep cash for the Annual Report too, filed with the Tennessee Secretary of State every year, with a state fee of at least $300, profit or not. Tax follows the year's result, not the draw: a profit by year end means income tax and self-employment tax on your share. Read what your operating agreement says about distributions, and get a tax professional's view before your draws exceed what you have put in.

Sources

6 documents

Each entry below is a document recorded in our verified Tennessee 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.

sos.tn.gov/businessesTennessee Secretary of State: business entity filings
law.justia.com/codes/tennessee/title-48/chapter-249/part-10/section-48-249-1017/Tennessee statutory text, unofficial mirror: Annual Report
sos-prod.tnsosgovfiles.com/s3fs-public/document/SS-4270%20LLC_0.pdfTennessee agency guidance: Annual Report
tn.gov/content/dam/tn/revenue/documents/tax_manuals/june-2025/Frachise-Excise-Tax-Manual.pdfTennessee agency guidance: Franchise and Excise Tax
tn.gov/content/dam/tn/revenue/documents/forms/fae/fae170instructions2022.pdfTennessee agency guidance: Franchise and Excise Tax
tn.gov/revenue/taxes/franchise---excise-tax.htmlTennessee Department of Revenue: file the Franchise and Excise Tax

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Edmond Hui · Founder, MyStateLLC

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.

How we check facts

3 Ways to Pay Yourself from Your Tennessee LLC

Owner's Draw

Guaranteed Payment

Salary via S-Corp Election

Tennessee Tax Notes for LLC Owners

Income Tax

Self-Employment Tax

Estimated Taxes

Common Mistakes to Avoid

Frequently Asked Questions

Sources

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