There are TWO parts to an LLC or any company structure.
This being the entire point of creating an LLC.
The context is that a lawyer is after your LLC, and he's arguing that the LLC is not genuine, so he can go after your personal assets - your house, car, IRAs, tap your wife's salary etc. This is called "piercing the corporate veil".
What would he use to claim the LLC is not genuine?
- Commingling assets - mixing and confusing LLC and personal money in the same accounts, buying yourself a sofa with LLC assets, etc.
- The LLC was never adequately funded to operate as a standalone business, i.e. didn't have enough cash on hand to pay insurance deductibles on a claim.
- Doing something dirty, using the shield to evade consequences.
- Ignoring the "corporate formalities" such as having meetings with minutes, having written bylaws and enforcing them.
The determination here is between you and the judge in a lawsuit.
Suffice it to say, the way you withdraw money must consider the above issues, or you risk breaking the liability shield and becoming personally liable, which means you've been wasting the $25 every year to keep it registered.
The IRS has a word for single member LLCs: "Disregarded entity".
The IRS wants to know that the entity exists and it's connected to you. But for reporting tax numbers, they simply want the LLC's numbers folded into your personal numbers, because you are the same entity for tax purposes.
The determination here is made by you. *LLCs are incredible versatile structures, and you can actually choose to have it taxed like a corporation where it is a separate "person" which files its own tax return. *
The IRS doesn't care how you move money from the LLC to yourself, since it's all the same to them.
The upshot is that while your own lawyer prohibits you from thinking of the assets as "all one big pile", IRS requires you to. Yes, it's enough to give you whiplash.