Reasonable Salary vs Owner Draw

Set Your LLC’s Owner Compensation Structure Before the First Tax Year Ends

LLCs taxed as sole proprietorships or partnerships distribute profits via owner draw — no payroll taxes. LLCs taxed as corporations must pay owners a reasonable salary. Choosing the wrong structure or mixing them incorrectly triggers IRS scrutiny. Rapid Registered Agent helps LLCs select the right tax classification and compensation structure from formation forward.