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.
Affiliate disclosure: We may earn a commission at no extra cost to you.
You withdraw money directly from the LLC's bank account as needed throughout the year. The draw is treated as a distribution of your ownership share, not as wages or salary. There's no set schedule or amount required.
Tax treatment: Owner's draws are not subject to payroll taxes, but the LLC's entire net profit is subject to federal self-employment tax (15.3% for 2026). Washington has no state income tax, so you only owe federal income tax on your share of LLC profits. You'll receive a Schedule K-1 showing your profit allocation.
How to do it
Transfer money from your LLC business account to your personal account, documenting it as an owner's draw
Record the transaction in your accounting system with the date, amount, and note that it's an owner distribution
Set aside approximately 25-30% of LLC profits for federal income and self-employment taxes since no taxes are withheld from draws
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Guaranteed Payment
The LLC pays you a fixed amount on a regular schedule (monthly, quarterly, etc.) for services performed for the LLC. This payment is guaranteed regardless of whether the LLC is profitable. Any remaining profits after guaranteed payments are distributed based on ownership percentages.
Tax treatment: Guaranteed payments are treated as ordinary income subject to federal self-employment tax (15.3%) and federal income tax. Washington has no state income tax, so there are no state taxes on guaranteed payments. The LLC deducts guaranteed payments as a business expense, reducing its taxable income.
How to do it
Document the guaranteed payment amount and schedule in your LLC operating agreement or partnership agreement
Set up regular payments from the LLC business account, treating them as business expenses in your accounting system
Issue yourself a Form 1099-NEC at year-end if guaranteed payments exceed $600, and make quarterly estimated tax payments
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Salary via S-Corp Election
Your LLC elects to be taxed as an S-Corporation by filing Form 2553 with the IRS. You become an employee of your own LLC and must pay yourself a reasonable salary for services performed. Additional compensation can be taken as distributions, which aren't subject to payroll taxes.
Tax treatment: Your salary is subject to payroll taxes (15.3% split between employer and employee portions), while distributions above your salary are not subject to self-employment tax. Washington has no state income tax, so you only owe federal income tax on both salary and distributions. The LLC pays employer payroll taxes and issues you a W-2.
How to do it
File Form 2553 with the IRS to elect S-Corp tax treatment and obtain an Employer Identification Number if you don't have one
Set up payroll to pay yourself a reasonable salary based on industry standards for similar work, withholding federal income and payroll taxes
Take additional compensation as distributions after paying your salary, ensuring you maintain proper documentation for both salary and distribution payments
Washington Tax Notes for LLC Owners
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Income Tax
Washington has no state income tax, which is advantageous for LLC owners. You'll only owe federal income taxes on your LLC income, regardless of which payment method you choose.
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Self-Employment Tax
Washington LLC owners must pay federal self-employment tax (15.3% for 2026) on their share of LLC profits when using owner's draws or guaranteed payments. Only the S-Corp election allows you to avoid SE tax on distributions above your reasonable salary.
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Estimated Taxes
Since Washington has no state income tax, you only need to make quarterly federal estimated tax payments if you expect to owe $1,000 or more in federal taxes. Payments are due on January 15, April 15, June 15, and September 15 each year.
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 making quarterly estimated tax payments, leading to penalties and interest when you file your annual return
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Failing to maintain proper records of all payments to yourself, including dates, amounts, and the type of payment (draw, guaranteed payment, or salary)
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Over-paying yourself early in the year without considering cash flow needs, or under-paying yourself and creating personal financial strain
Frequently Asked Questions
You can pay yourself from your Washington LLC as frequently as you want through owner's draws, provided your LLC maintains adequate cash flow and you document each withdrawal. However, the frequency depends on your payment method. For owner's draws, there's no legal limit—you could withdraw daily if funds allow. If you've elected S-Corp taxation with the IRS, you must pay yourself a "reasonable salary" on a consistent schedule (typically bi-weekly or monthly) and report it on Form 941 quarterly payroll tax returns filed with the Washington Department of Revenue. Guaranteed payments to multi-member LLCs should follow the schedule specified in your operating agreement. The practical implication: irregular draws trigger IRS scrutiny, while consistent salary payments provide tax protection and audit defense. Establish your payment schedule in your LLC operating agreement before January 1, 2026, then implement it immediately to demonstrate intentional business practice.
No, owner's draws themselves are not subject to payroll taxes. However, you'll owe federal self-employment tax (15.3%) on your share of the LLC's net profit, calculated on Schedule C (Form 1040) or Schedule SE. Washington has no state income tax, eliminating state tax liability on draws. This means you avoid Washington Department of Revenue payroll withholding requirements that apply to W-2 employees, but you remain responsible for estimated quarterly federal tax payments using Form 1040-ES if you expect to owe $1,000 or more annually. For multi-member LLCs taxed as partnerships, file Form 1065 with the IRS and receive a Schedule K-1 showing your profit share. The practical implication: your draw flexibility increases since you're not withholding payroll taxes, but you must set aside funds quarterly for federal self-employment and income taxes to avoid penalties. Calculate your estimated quarterly payments now using the IRS worksheet and submit Form 1040-ES by April 15, June 17, September 16, and January 15 respectively.
Your Washington LLC salary should cover personal living expenses while maintaining enough cash for business operations and tax obligations. The Washington Department of Revenue requires you to set aside approximately 25–30% of net profits for federal and self-employment taxes, which you'll owe quarterly on Form 1040-ES. Many Washington LLC owners structure draws as a percentage of monthly revenue—typically 50–70% depending on business maturity. If you're reinvesting heavily, take smaller draws; if cash flow is stable, increase distributions. The practical reality: insufficient draws leave you cash-poor; excessive draws jeopardize business solvency and IRS audit risk. Calculate your exact obligation using the Washington State Department of Revenue's tax calculator at dor.wa.gov, then schedule quarterly estimated tax payments with the IRS. Document all draws in your LLC's operating agreement to demonstrate legitimacy to tax authorities.
Keep detailed records of all payments, including dates, amounts, bank statements, and descriptions of whether each payment is an owner's draw, guaranteed payment, or salary. Washington's Department of Revenue requires you to maintain these records for at least seven years for potential audit purposes. Separate your business and personal bank accounts—this distinction is critical for proving legitimate distributions versus personal expenses. Document every transaction in your LLC's accounting system, whether you use QuickBooks or spreadsheets. Save receipts, invoices, loan agreements, and correspondence related to payment decisions. This documentation protects you if the IRS or Washington State audits your tax returns, and it substantiates the reasonableness of any salary you claim as a deduction. Without clear records, you risk losing deductions or facing penalties. Start by opening a dedicated business checking account with a Washington bank and implementing a simple monthly ledger tracking all owner distributions.
The S-Corp election typically makes sense when your Washington LLC generates significant profits—often $60,000 or more annually—and you can justify paying yourself a reasonable W-2 salary. By electing S-Corp status with the IRS (Form 2553), you split income between salary and distributions; only the salary portion is subject to the 15.3% self-employment tax, while distributions avoid it entirely. This structure can save $3,000–$5,000+ yearly on taxes. However, Washington has no state income tax, so your savings come purely from federal self-employment tax reduction. The trade-off: you'll pay payroll processing fees ($500–$1,500 annually) and face stricter IRS scrutiny on salary reasonableness. File Form 2553 by March 15 following your tax year, or within two months and 15 days of starting your LLC. Consult a CPA to calculate your specific break-even point before electing S-Corp status.
Yes, you can take owner's draws from your Washington LLC before it's profitable, provided the business has sufficient cash reserves. However, draws reduce your adjusted basis in the LLC, which the Washington Department of Revenue tracks on your state tax return. If cumulative draws exceed your basis, you'll face personal tax liability on the excess amount—potentially triggering self-employment tax obligations even without net income. This matters because Washington has no state income tax, but federal self-employment tax still applies. Before withdrawing funds, calculate your current basis by adding your initial investment plus any capital contributions, then subtracting prior losses and draws. File Form 1065-B with the IRS to report partnership-level items if your LLC is taxed as a partnership. Consider retaining cash for operating expenses, payroll, and unexpected costs. Your next step: consult a CPA to review your basis calculation and establish a sustainable draw schedule aligned with your projected profitability timeline.
