How to "pay" one self in a single member LLC w/ separate checking account?
I own a side company creating web apps. I formed an LLC, registered an EIN and opened a business checking account. Recently, I sold a copy of my software for let's say ,000. Now, since everything gets passed through to me personally, how do I go about "using" these funds for personal things like buying a home or buying a new TV?
I figure, from the IRS standpoint, they just want me to show profit/loss. As long as I keep track of this, they don't care what i do with my revenue, correct? I guess the question is, how do I show (do i?) that my business account has ,000 but I transferred over ,000 into my personal account in order to spend it?
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Basically, yes. Don't use your business account for personal spending because it may invalidate your limited liability protection. Transfer a chunk of money to your personal account, write it down in your books as "distribution" (or something similar), and use it in whatever way you want from your personal account.
The IRS doesn't care per se, but mixing personal and business expenses will cause troubles if you're audited because you'll have problems distinguishing one from another.
You should be using some accounting software to make sure you track your expenses and distributions correctly. It will make it easier for you to prepare reports for yourself and your tax preparer, and also track distributions and expenses. I suggest GnuCash, I find it highly effective for a small business with not so many transactions (if you have a lot of transactions, then maybe QuickBooks would be more appropriate).
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