You transfer money directly from your LLC's business bank account to your personal account whenever needed. This represents a withdrawal of your ownership stake in the business, not a salary or wage. The amount and timing are entirely at your discretion based on cash flow and business needs.
Tax treatment: Owner's draws are not taxed when withdrawn since you already pay taxes on all LLC profits whether distributed or not. In Utah, you'll pay federal self-employment tax (15.3%) plus Utah state income tax (currently 4.95% flat rate) on your LLC's net income. The draw itself doesn't create additional tax liability.
How to do it
Transfer money from your LLC business bank account to your personal account using online banking, check, or wire transfer
Record the transaction in your accounting software as an 'owner's draw' or 'distribution' to maintain proper bookkeeping
Set aside funds for quarterly estimated taxes since no taxes are withheld from draws
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Guaranteed Payment
The LLC makes regular payments to you for work performed, similar to a salary but without formal payroll. These payments are guaranteed regardless of LLC profitability and are treated as business expenses. The LLC deducts these payments, reducing overall taxable income for all members.
Tax treatment: Guaranteed payments are subject to federal self-employment tax (15.3%) and Utah state income tax (4.95% flat rate). The LLC can deduct these payments as a business expense, while you report them as income on Schedule SE. This differs from owner's draws since guaranteed payments create immediate tax obligations.
How to do it
Document guaranteed payment terms in your LLC operating agreement, including amount, frequency, and services provided
Issue Form 1099-NEC to yourself if guaranteed payments exceed $600 per year for IRS reporting
Make quarterly estimated tax payments to cover self-employment and income taxes on guaranteed payment amounts
3
Salary via S-Corp Election
Your LLC elects S-Corporation tax status with the IRS, allowing you to become an employee and pay yourself a reasonable salary. Additional profits can be distributed as non-employment income, avoiding self-employment tax. This creates payroll obligations but can generate significant tax savings for profitable businesses.
Tax treatment: Your salary is subject to regular payroll taxes (7.65% employer + 7.65% employee portions) and Utah income tax withholding. Remaining distributions are taxed as investment income without self-employment tax. Utah recognizes federal S-Corp elections automatically, so no separate state filing is required for this election.
How to do it
File Form 2553 with the IRS within 75 days of your desired effective date to elect S-Corporation tax treatment
Set up payroll processing to pay yourself a reasonable salary comparable to similar positions in Utah
Take additional profits as distributions after paying required salary, avoiding self-employment tax on distribution amounts
Utah Tax Notes for LLC Owners
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Income Tax
Utah imposes a flat 4.95% state income tax on LLC owner income, which applies to all payment methods. This rate applies to both guaranteed payments and owner's draw income from pass-through taxation.
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Self-Employment Tax
Utah LLC owners must pay federal self-employment tax (15.3%) on owner's draws and guaranteed payments. S-Corp election can reduce this burden by limiting SE tax to reasonable salary amounts only.
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Estimated Taxes
Utah LLC owners must make quarterly estimated tax payments if they expect to owe $750 or more in Utah state taxes. Federal quarterly estimates are required if you expect to owe $1,000 or more. Payments are due April 15, June 15, September 15, and January 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 draws, which complicates bookkeeping and may jeopardize LLC liability protection
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Not paying quarterly estimated taxes on LLC income, leading to penalties and interest charges from both the IRS and Utah State Tax Commission
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Failing to document owner's draws and guaranteed payments properly, making it difficult to track basis for tax purposes and creating problems during audits
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Over-paying yourself during lean months or under-paying yourself relative to business value, either straining cash flow or missing opportunities for tax-efficient compensation planning