Best way to pay yourself from an LLC for small contractor

[Kole Kingslien]

Hi all, I am looking for advice on how to help my dad out with getting his business going. I have set up a Single member LLC for him, and am wondering if I should put him on payroll with his other employee(s), what would be the best thing to do as far as taxes and accounting go? Right now this is a small operation (under 75K gross/year), but we are hoping to get it to grow. He does mainly decks and other exterior work, but does a little of everything.

Also, does anyone know of any resources or guides to learn how to categorize expenses and do bookkeeping for this type of business?

Thank you!

[Eamonn McElroy]

@Kole Kingslien

A SMLLC that is taxed as a disregarded entity should not be running payroll for its owner.

If your dad wants to take money out of the business he should do that as an 'owner's draw' or 'owner's distribution', which will be a balance sheet movement. Depending on taxable income of the LLC, your dad's other taxable income, projected growth of the business, and your dad's goals for the business, an election to have the LLC taxed as an S Corp or a C Corp might make sense now or in the future. If the LLC is taxed as an S Corp or C Corp, running payroll for your dad and issuing him a W-2 becomes possible.

Best to consult a tax CPA/EA who will examine all facts and circumstances.