To transfer money from your LLC to your personal account, you write a check or send an ACH transfer from the business bank account to your personal one — but the label you put on that transfer, and the tax consequences that follow, depend on how the IRS classifies your LLC. A single-member LLC owner takes an owner’s draw. A multi-member LLC pays a distribution or a guaranteed payment. An LLC that elected S-Corp status has to run payroll and pay a reasonable salary before any distributions come out. Whichever category you fall into, the transfer needs a paper trail that shows the business is operating as its own entity.
Start With How Your LLC Is Taxed
The IRS does not tax LLCs as LLCs. It taxes them as sole proprietorships, partnerships, or corporations, and that classification controls what kind of payment you can take.
Single-Member LLC
If you are the only owner and haven’t filed an election, the IRS treats your LLC as a disregarded entity. You report the business income on Schedule C of your personal Form 1040.1Internal Revenue Service. Single Member Limited Liability Companies Money you move to your personal account is an owner’s draw — a withdrawal of equity, not a wage. The draw itself is not a separate taxable event, because you already owe income tax and self-employment tax on the LLC’s net profit for the year whether or not you actually withdraw it.
Multi-Member LLC
An LLC with two or more members defaults to partnership taxation. The LLC files Form 1065 as an information return; the entity itself doesn’t pay income tax.2Internal Revenue Service. Partnerships Each member gets a Schedule K-1 showing their share of profits and losses. Members can be paid two ways: a distribution of their profit share, or a guaranteed payment for services rendered to the business. Guaranteed payments work somewhat like a salary — reported as income to the partner, deductible by the partnership — but they don’t run through a formal payroll system.3Internal Revenue Service. Instructions for Form 1065 (2025)
S-Corp-Elected LLC
An LLC can file Form 2553 to elect S-Corporation tax treatment.4Internal Revenue Service. S Corporations Any owner who works in the business must then take a reasonable salary through a formal payroll system before pulling additional money out as a distribution. The salary is subject to Social Security and Medicare withholding; the distributions on top of it are not. That gap is the tax appeal of the election, and it’s also its main risk: if the IRS decides your salary is unreasonably low, it can reclassify distributions as wages and add back employment taxes, penalties, and interest.5Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues The IRS weighs your training and experience, hours worked, comparable pay for similar work, and how much of the company’s revenue comes from your personal services versus capital or other employees.
Moving the Money
Once your classification is settled and you have the internal authorization in place, the mechanical transfer is simple. You have a few options:
- Check. Write a check from the LLC’s account payable to yourself and deposit it into a personal account kept entirely separate from the business.
- ACH transfer. Most business banking portals let you link a personal account using its routing and account numbers. Funds usually arrive in one to three business days.
- Wire transfer. Faster than ACH for large sums. Domestic wires typically cost $15 to $45 depending on the bank.
- Payroll (S-Corp only). The salary portion has to run through a formal payroll process. Services like Gusto or ADP calculate withholding for federal and state income tax, Social Security, and Medicare, then direct-deposit your net pay.
Many owners set a regular cadence — monthly or quarterly — rather than pulling money out whenever they want it. Reviewing profit and cash reserves before each scheduled draw helps prevent overdrawing the business. Writing that cadence into your operating agreement adds formality that reinforces the LLC’s legal standing.
Documentation Every Transfer Needs
The transfer itself is a two-minute task. The paperwork around it is what protects you if the IRS or a court later asks whether the LLC really operates as a separate entity from its owners.
- Operating agreement. This is the LLC’s internal rulebook. It should say how profits are distributed, what percentage each member receives, and what approval a distribution requires.6U.S. Small Business Administration. Basic Information About Operating Agreements
- Member resolution. For multi-member LLCs, a short written resolution recording the date, the approved amount, and each member’s consent adds a formal authorization layer. Single-member LLCs benefit from similar written records even when no vote is required.
- Accounting entries. In your bookkeeping software, record draws under an equity or distribution account, not as an expense. A single-member LLC typically uses an “Owner’s Draw” or “Drawing Account” on the balance sheet, with the balance rolled into owner’s equity at year-end. Multi-member LLCs track each member’s capital account separately.
- Transfer description. Note the purpose on the check memo line or the electronic transfer description (“Q2 Owner’s Draw,” “June Distribution”).
Keep resolutions, bank statements, and accounting records together, in a physical binder or a secure digital folder, so they are accessible during an audit or a dispute.
Taxes You Still Owe on the Money You Take Out
An owner’s draw or partnership distribution is not withheld against, so you handle the tax bill yourself.
Self-employment tax on the LLC’s net earnings runs 15.3% — 12.4% for Social Security on earnings up to $184,500 in 2026, and 2.9% for Medicare with no cap.7Social Security Administration. Contribution and Benefit Base If your net self-employment income exceeds $200,000 as a single filer, an additional 0.9% Medicare tax applies to the amount above the threshold. You can deduct half of your self-employment tax on Schedule 1, which reduces your adjusted gross income.
Under an S-Corp election, Social Security and Medicare taxes apply only to the salary. Distributions on top are exempt, which is where the savings come from — provided the salary is defensible.
If you take draws rather than a payroll salary, you’ll owe quarterly estimated tax payments. For 2026 the deadlines are April 15, June 15, September 15, and January 15, 2027. You can skip that final January payment if you file your 2026 return and pay in full by February 1, 2027.8Internal Revenue Service. Form 1040-ES – Estimated Tax for Individuals You generally owe an underpayment penalty if you’ll owe $1,000 or more after withholding and credits, unless you paid at least 90% of the current year’s tax or 100% of the prior year’s (110% if your AGI exceeded $150,000).9Internal Revenue Service. Estimated Taxes S-Corp owners who take a W-2 salary have withholding built in, but distributions above the salary may still not be fully covered.
Watch Your Basis
Your basis in the LLC is roughly the sum of what you have put in (contributions plus your share of profits) minus what you have taken out (distributions plus your share of losses). If you withdraw more than your current basis, the excess is taxed as capital gain. For a partnership-taxed LLC, cash distributions above your adjusted basis in the partnership interest are treated as gain from the sale of that interest.10Office of the Law Revision Counsel. 26 U.S. Code 731 – Extent of Recognition of Gain or Loss on Distribution For an S-Corp-elected LLC, distributions above your stock basis are similarly treated as capital gain, long-term if you have held the interest for more than a year.11Office of the Law Revision Counsel. 26 U.S. Code 1368 – Distributions Track basis each year to avoid a surprise bill.
Transfers That Aren’t Draws
Not every payment from the LLC to you is a distribution. Two other common transfers follow different rules and don’t count as income if handled correctly.
Expense Reimbursements
If you paid a legitimate business expense out of your own pocket, the LLC can reimburse you tax-free, but only under what the IRS calls an accountable plan. The expense must have a business connection, you must provide receipts and a description of the business purpose within a reasonable time, and you must return any reimbursement that exceeds the actual expense.12Internal Revenue Service. Publication 463 (2024), Travel, Gift, and Car Expenses Miss any of the three conditions and the IRS treats the reimbursement as taxable compensation. For travel, you can use federal per diem rates instead of tracking every meal receipt; the standard meals-and-incidental-expenses rate for fiscal year 2026 is $68 per day in most locations, up to $92 in higher-cost areas.13Federal Register. Maximum Per Diem Reimbursement Rates for the Continental United States (CONUS)
Loan Repayments
If you loaned personal money to the LLC, the LLC repaying you is not income; it’s return of your own capital, plus interest. But the loan has to look real. Put the terms in a written promissory note, set an interest rate that meets or exceeds the IRS’s Applicable Federal Rate, and follow the repayment schedule. As of early 2026, the AFR ranges from about 3.56% (short-term) to 4.70% (long-term).14Internal Revenue Service. Rev. Rul. 2026-3 – Applicable Federal Rates With no written agreement or a below-AFR rate, the IRS can recharacterize the repayment as a taxable distribution or a gift.
Don’t Break the Liability Shield
The point of forming an LLC is legal separation between you and the business. When a court decides that separation isn’t real — a process called piercing the veil — you can be held personally liable for the LLC’s debts and judgments. Courts weigh several factors:
- Commingling funds. Paying personal bills from the business account, or depositing business revenue into a personal one, is the most common red flag.
- Ignoring formalities. No operating agreement, no member resolutions, no separate books.
- Undercapitalization. An LLC that was never funded enough to realistically meet its obligations looks like a shell.
- Alter ego. Withdrawing funds freely, without documentation or authorization, makes the LLC look like an extension of the owner.
Separate bank accounts, documented transfers, and adherence to the distribution rules in your operating agreement are the practical fixes. They matter most for single-member LLCs, where the temptation to treat the business account casually is strongest.