Disregarded Entity LLC Payroll runs under the LLC's EIN
Your LLC's profit goes on your return, but payroll taxes belong to the LLC. Here's what to set up before your first payday.
Income tax and payroll tax follow different rules
For income tax, the IRS looks through a one-owner LLC to you. For payroll tax, it treats the LLC as its own employer. Since 2009, a disregarded LLC reports and pays employment taxes under its own name and EIN.
That is why a payroll form asks for the LLC's EIN even though your income tax return uses your own number. Both are correct.
The moment it matters is your first employee. Before that first payday, the LLC needs an EIN, state payroll registrations, a payroll provider and a deposit schedule.
What payroll setup includes
We set payroll up for you: the EIN if you don't have one yet, the state registrations, the payroll provider you pick, the deposit schedule, and the accounts where wages post in your books. Then you run each payday with that provider.
Setup also sorts out who is an employee and who is a contractor, and keeps reimbursements and owner draws out of wages. If someone you pay as a contractor looks more like an employee, we'll walk through the IRS factors with you.
As the owner of a disregarded LLC, you are not an employee of it. You take draws, and you pay self-employment tax on the profit. That changes if the LLC elects S corp status: then an owner who works in the business takes a reasonable salary through payroll. We help you choose a salary based on the hours and duties you actually have.
Questions owners ask before a first hire
Can I use my own Social Security number for payroll?
No. Payroll uses the LLC's EIN. Your income tax return still uses your own number. The numbers page shows which one goes where.
Who runs payday?
Your LLC does, through whichever payroll provider you choose. We set the accounts, registrations and provider up, then post the payroll to your books each month so they stay current.
Which payroll returns will the LLC file?
Federal Form 941 each quarter and Form 940 once a year, both under the LLC's EIN. W-2s go to employees by January 31. Your state adds its own unemployment and, in many states, withholding reports. Your payroll provider usually prepares these, and we make sure the setup is right.
When do the payroll taxes get deposited?
The IRS assigns a deposit schedule, usually monthly or semiweekly, based on how much payroll tax the LLC reported in an earlier period. A new employer is usually monthly. We set that schedule in your payroll provider, so deposits go out on time.
What changes if I file Form 2553 later?
The LLC becomes an S corporation for tax. You then pay yourself a reasonable salary through payroll, and the LLC files Form 1120-S. We plan that switch with you before you file.
Plan your first hire
Tell us when the first hire starts and whether you already have a payroll provider.
You will be talking to the Steven Palmieri practice.