An owner's draw allows you to take money from your LLC's bank account whenever you need it, up to your ownership percentage. You're essentially taking a portion of the profits you've already earned. The amount and timing are entirely up to you, as long as the LLC has sufficient funds.
Tax treatment: Owner's draws are not taxable events themselves, but you'll pay Wisconsin income tax (ranging from 3.54% to 7.65%) and federal taxes on your share of the LLC's profits regardless of how much you actually withdraw. You'll also owe self-employment tax (15.3%) on the LLC's net earnings from self-employment.
How to do it
Transfer money from your LLC business account to your personal account, clearly labeling it as an 'owner's draw' in your records
Record the transaction in your accounting system, debiting your capital account and crediting cash
Set aside money for quarterly estimated taxes since no taxes are withheld from draws
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Guaranteed Payment
Guaranteed payments are fixed amounts paid to LLC members for services rendered, similar to a salary but without payroll taxes. These payments are made regardless of whether the LLC is profitable. They're treated as business expenses for the LLC and reduce the overall profit subject to taxation.
Tax treatment: Guaranteed payments are subject to Wisconsin income tax and federal income tax as ordinary income, plus self-employment tax (15.3%). The LLC can deduct these payments as business expenses, reducing its overall taxable income. Wisconsin follows federal tax treatment for guaranteed payments.
How to do it
Document the guaranteed payment arrangement in your LLC operating agreement, specifying amounts and payment schedule
Make regular payments to the member, recording them as guaranteed payments in your accounting system
Issue Form 1099-NEC to the member if total guaranteed payments exceed $600 in a tax year
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Salary via S-Corp Election
By electing S-Corp tax status with the IRS, your LLC can pay you as an employee with a reasonable salary subject to payroll taxes, while distributing additional profits as distributions that aren't subject to self-employment tax. This can result in significant tax savings for profitable businesses.
Tax treatment: Your salary is subject to Wisconsin income tax, federal income tax, and payroll taxes (15.3% split between employer and employee). Distributions are subject to Wisconsin and federal income tax but not self-employment tax. Wisconsin conforms to federal S-Corp taxation rules.
How to do it
File Form 2553 with the IRS within 75 days of the election effective date to elect S-Corp tax status
Set up payroll to pay yourself a reasonable salary, withholding appropriate federal, state, and FICA taxes
Take additional compensation as distributions, ensuring proper documentation and that distributions don't exceed your basis in the LLC
Wisconsin Tax Notes for LLC Owners
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Income Tax
Wisconsin has a progressive income tax system with rates ranging from 3.54% to 7.65% for 2026. LLC owners pay Wisconsin income tax on their share of the LLC's profits, regardless of the payment method chosen.
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Self-Employment Tax
Wisconsin LLC owners are subject to federal self-employment tax (15.3%) on net earnings from self-employment, which includes most LLC profits. This applies to owner's draws and guaranteed payments, but not to distributions from S-Corp elected LLCs.
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Estimated Taxes
Wisconsin LLC owners must make quarterly estimated tax payments if they expect to owe $500 or more in Wisconsin income tax. Federal quarterly payments are required if you expect to owe $1,000 or more. Due dates are April 15, June 15, September 15, and January 15.
Common Mistakes to Avoid
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Mixing personal and business finances by using the LLC bank account for personal expenses instead of taking proper draws
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Failing to make quarterly estimated tax payments and facing penalties and interest on underpaid taxes
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Not properly documenting owner draws and guaranteed payments, making tax preparation difficult and potentially triggering IRS scrutiny
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Either paying yourself too little and harming cash flow, or taking excessive draws that jeopardize the LLC's financial stability and ability to pay business expenses