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Category: Tax
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Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I own a multi-member LLC (my wife and I are the members) structured

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I own a multi-member LLC (my wife and I are the members) structured as a corporation in the eyes of the IRS. My income from the business is irregular, I provide consulting services in marketing. I finished a quarter and the company made a profit and I would like to pay myself some of the profits but don't know how. I do not have a "payroll" per se established. Do I need to set up payroll for myself and can I set it up for quarterly or monthly payouts?
You can set up a payroll, but given the sporadic nature of your income/profits you can simply pay out a reasonable amount of salary, and pay in the payroll/self employment taxes as you do.

Customer: replied 5 years ago.

Would I need to set up all of the federal and state accounts now or should I just set the money aside and pay those tax withholdings at the end of the year?

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question - there is more detail here that you need to understand.

First, structuring your LLC as a corporation for tax purposes isn't necessary. You'd probably be at an advantage to structure as an S-Corp or as a disregarded entity. Under the disregarded entity you would not have to worry about any payroll for you or your spouse because you would pay self employment taxes. This is the equivalent of payroll.

If you need to set up payroll, you will need to have regular intervals and the proper withholdings. You could pay yourselves a reasonable hourly rate in order to allocate your work in line with your income stream. You would need to file 940 and 941 reports quarterly and annually.

You could also just take a dividend from the company, if that's easier.

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Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16580
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Customer: replied 5 years ago.

Thank you - this was very helpful!

You're welcome - if you ever need anything else, you can ask for "MyVirtualCPA" in your question subject and it will be routed to me.
My apologies for not getting back to you more quickly than this.

It is not my practice to step away after initially answering a question without waiting for any follow-up questions that may come.

I was called away on a personal emergency.

The original answer stands, however, you do not have to set up a periodic payroll, especially given the sporadic nature of your income/profits as you mention.

You can always wait until the end of the year, especially of you are unsure of profitability. Some would advise so.

Further, I won't address your structure as you have said that it has already been established (other than to be sure that the answer applies to the structure you have established, as we have done here).

Additionally, the 940 form mentioned above, covers a calendar year, and is due by January of the following year (february, if you have already paid your FUTA taxes for the year). However, if your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment (see page 3). If your FUTA tax is not $500 or more, you can continue carrying the tax liability throughout the year until your cumulative tax is more than $500. At than point you must deposit your FUTA tax for the quarter.

Here's a copy of Form 940:

And, again, the INSTRUCTIONS for form 940 are in the paragraph above.

So, finally, the form 940 provided above is for FUTA (Federal Unemployment Taxes) Next, I'll deal with the form 941, the employers quarterly tax return:

The withholding required for employers is to do so each time wages are paid You must withhold — or take out of employees' paychecks — certain amounts for federal income tax, social security tax, and Medicare tax. Under the withholding system, taxes withheld from employees are credited to employees in payment of their tax liabilities.

Here are the INSTRUCTIONS for form 941:

You file the 941 for the quarter in which you first paid wages subject to social security and medicare taxes or subject to federal income tax withholding.

Finally, to answer your original question, as you can see from the paragraphs above, the requirements for when these payments (940 and 941) depend on your profitability.

Depending on how often you pay yourself, you may very well not have to file and pay (either form) until the end of the year.

... hope this helps to clarify.

Don't hesitate to come back here of you need further clarification.


Category: Tax
Satisfied Customers: 12691
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you

Thank you so much.

Good Luck!