How do we pay salary to us or is it better to issue 1099 NEC to myself like I issue for our contractor instead of running a paycheck?

Hi Siva!

If you are a single member LLC, as the owner of your business, you don’t have to go on payroll or issue a 1099 to yourself at the end of the year. You could simply pay yourself by taking owner’s draws which simply means you make transfers from your business account to your personal account.

Contractors you hire would be different as they are external from your business, you would just render payment directly to them for their services and because they are contractors, if you paid them more than $600 in the year via check, ACH, wire, Zelle or some other form that’s not credit card or through a credit card processor, you would need to issue them a 1099. 

Thank you for you response. So I would pay self-employment tax on entire owner’s draw right? can’t take advantage of Distributions. Please correct me if I am wrong.

If you are registered as a single member LLC, and have not elected to be treated as an S-Corp, then your net profits (what’s left from the business after business expenses AND where you would pay yourself from) is subject to both employment tax and income tax (federal and state, if applicable). 

For example, if the business made $100,000 in revenue (top line) and had $40,000 in business expenses, then the net profits are $60,000. You’re subject to both employment tax and income tax (federal and state, if applicable) on the entire $60k, regardless of whether you pay yourself the entire $60k or a portion of it.