Just starting out
I'm the Only Owner of My LLC — How Do I Actually Pay Myself?
Why This List Exists
Taking money out of your own LLC feels simple — it's your business, it's your money. It stops feeling simple the first time you owe more in taxes than you set aside, or a state notice shows up asking why nothing was ever filed. Draws aren't wages — no one withholds anything for you, so skipping the self-employment tax math means the bill lands all at once. One account for everything makes it impossible to tell what's actually a business expense. And Rhode Island and Massachusetts both expect ongoing filings and fees just for the LLC to exist — most first-time owners never hear about them until something's overdue.
The Six Mistakes
01
Treating Draws Like a Paycheck
Money moves from the business account to a personal account, and nothing is set aside — the whole amount gets spent like take-home pay. A W-2 job trains you to expect taxes are already handled; an LLC draw doesn't work that way. By tax time, you owe self-employment tax and income tax on the full amount, with nothing left over to pay it.
02
No Regular Draw Schedule or Amount
Draws happen whenever cash is needed — $500 one week, $3,000 the next, with no consistent pattern, because there's no HR department setting a salary. Without a consistent number, there's no way to estimate what you actually owe, so quarterly payments get skipped or guessed at.
03
Draws Pulled From a Commingled Account
The business and personal accounts are the same account, because opening a second one feels like an extra step when the business is small enough to track "in your head." The liability protection an LLC is supposed to provide weakens fast once personal and business money can't be told apart.
04
Skipping Quarterly Estimated Taxes
Taxes only get paid once a year, at filing time, because nobody sends a bill for quarterly estimates the way a landlord sends a rent notice. The IRS and state both charge underpayment penalties for the months the money should have been paid in, even if the full amount is paid by April.
05
Booking Draws as a Business Expense
Owner draws get entered in the books as "salary" or "contractor pay" instead of an equity withdrawal, because it feels like an expense the moment money leaves the account. Profit looks artificially lower than it is, which distorts everything downstream — loan applications, tax estimates, and your own sense of how the business is doing.
06
Missing State-Level Filings and Fees
No annual report gets filed, and the state's minimum LLC fee goes unpaid, sometimes for years, because formation felt like the finish line. Late fees compound, and in Rhode Island and Massachusetts alike, an LLC that falls too far behind can be administratively dissolved without much warning.
How This Actually Catches Up With You
Sloppy draws resolve themselves one of two ways — and one is a lot more expensive than the other.
Path A — you catch it yourself
You notice the gap before filing — a scramble to reconstruct the year, but still your timeline and your terms. You may still owe an underpayment penalty for the quarters you missed, but the number is smaller and the fix is straightforward.
Path B — the state or IRS catches it first
A notice arrives — unfiled reports, an underpayment flag, or a return that doesn't match the deposits an examiner can see. Now it's back taxes, penalties, and interest on their timeline — and a much closer look at everything else in the return.
The Fix Is Almost Always the Same
1
Set a real draw amount
Pick a consistent number you can sustain, and revisit it every quarter.
2
Open a separate business account
Every draw moves from there to your personal account — never from a shared pool.
3
Set aside for taxes with every draw
A simple percentage held back beats scrambling to find it in April.
4
Pay quarterly estimates
Federal and state — mark the four dates and treat them like any other bill.
5
Book draws to equity, not expense
Keep the P&L clean so it actually reflects how the business is doing.
6
Know your state's filing calendar
RI and MA both have annual requirements — put the dates somewhere you'll see them.
Frequently Asked Questions
Do I need to run payroll to pay myself from a single-member LLC?
No, not for a default single-member LLC with no S-corp election. You take draws, not a paycheck, and pay self-employment tax on your net profit through your personal return.
How much should I set aside from each draw for taxes?
A simple percentage held back the moment you draw is safer than guessing at tax time. The right number depends on your total income and state.
What happens if I skip quarterly estimated tax payments?
The IRS and state both charge underpayment penalties for the months the money should have been paid in, even if you pay the full amount by the annual filing deadline.