Most resources online for bookeeping for LLCs immediately repeat a myth about C-Corp taxation subjecting you to double-taxation, declare that nobody would set up their single-member LLC as anything but an S-Corp, and then proceed to talk about S-Corp taxation and bookkeeping.

In an S-Corp, profit isn't taxed at the business level; it's taxed on the owner's income. The owner puts money into the business and gets an owner draw (the business's bank accounts are your bank accounts, and you can give the owner equity to yourself).

In a C-Corp, there is no owner draw. Owners get money out of the business by:

  • Salary and bonuses (wage income) paid as reasonable compensation (paying yourself less or more than reasonable compensation will net you angry letters from the IRS)
  • Rent paid to owner properties
  • Shareholder dividends

Shareholder dividends are legal only from profits. Net operating profits are taxed at 21% (was 35% in 2016); dividends are then taxed at 15%.

Cash compensation and rent are business expenses and aren't taxed at the business level.

So here's the fun part: if I put $100,000 into my business, I have as much owner equity as if I put $1 in and loan my business $99,999. Once the business pays off the loan, all the assets of the business also belong to me. As the sole owner, no matter what I invest, 100% of the assets of the business belong to me. As I understand, if I invest $100,000, I can't get that back into my own pocket without paying taxes.

Is that right?

Another fun fact: LLCs don't have stock. An LLC as a C-Corp is taxed as a C-Corp, but it does not have Corporate shareholders—that is, it does not have what the SEC calls "stock".

So how do I set up the books for an LLC taxed as a C-Corp? It's different from an LLC taxed as an S-Corp, and different from a Corporation, isn't it?

What do these accounts look like?

  • I'm not familiar with the way LLCs are set up in the US (hence this is just a comment for you to consider perhaps amending your question), but the article What Type of Stock for a C Corporation? seems to imply that C Corporations do issue stock. – Lawrence Nov 8 '19 at 5:30
  • "Shareholder dividends are legal only from profits." I don't think this is true - companies with negative earnings pay dividends all the time. Note that you can still have positive cash flow and negative net profit. – D Stanley Nov 8 '19 at 13:20
  • There is almost no reason to set up an LLC as a C-Corp if you are a single owner/100% shareholder (this opens you up to double taxation with no real advantages). Please consult a tax attorney...LLC's don't have "stock" but they do have the concept of "shares". – Ron Beyer Nov 8 '19 at 13:29

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