Complete Guide to LLCs

Most LLC owners hit a wall when they realize payroll isn't just about writing checks. You've got tax classifications to decode, government registrations to complete, and compliance rules that vary wildly depending on your business structure. Bringing on your first employee? Switching to S-Corp status? Either scenario means you'll need a bulletproof payroll system—because the penalties for getting it wrong start at hundreds of dollars and climb from there.

Understanding LLC Payroll Requirements by Business Structure

Here's what trips people up: the IRS doesn't actually have a tax category called "LLC." Your company's tax treatment depends entirely on how it's classified—and that classification dictates everything about payroll.

Single-Member LLC Payroll Considerations

Running a one-person LLC taxed as a disregarded entity? You don't need payroll for yourself. Your business income flows straight through to Schedule C on your 1040, and you'll pay self-employment tax on whatever profit remains after expenses. Take money out whenever you want—those are owner's draws, not salary.

Everything changes when you hire someone or file Form 2553 to become an S-Corp. Hire your first employee, and suddenly you're responsible for withholding their taxes, filing quarterly reports, and keeping meticulous employment records. Elect S-Corp status, and the IRS now requires you to pay yourself a legitimate salary through payroll, complete with FICA withholding—no exceptions.

Multi-Member LLC Payroll Rules...