Who this applies to
Owners of single-member LLCs taxed on Schedule C.
Key questions
- Does the LLC have its own bank account and EIN?
- Are owner draws recorded as equity, not expenses?
- Is profit high enough to consider an S corporation election?
Review with the OICPA team
- Set up a chart of accounts that matches Schedule C
- Base estimated taxes on year-to-date profit
A single-member LLC is simple to form and simple to tax: by default the IRS ignores it and you report the business on Schedule C of your personal return. That simplicity tempts owners to skip proper bookkeeping. Here's how to keep an SMLLC's books right.
Treat the LLC as separate, even if the IRS doesn't
For federal income tax, a single-member LLC is "disregarded" unless it elects to be taxed as a corporation. Legally, though, it is a separate entity, and keeping its money separate supports the liability protection you formed it for.
- Open a business bank account in the LLC's name, using its EIN.
- Pay business expenses only from business accounts.
- Move money to yourself as owner draws, not as expenses or "salary".
Set up the books around Schedule C
Build the chart of accounts so it rolls up to Schedule C lines: advertising, car and truck expenses, contract labor, insurance, legal and professional fees, office expense, rent, supplies, travel, meals, utilities and so on. Then year-end is a report, not a project.
Common SMLLC bookkeeping entries
- Owner contributions when you put personal money into the business.
- Owner draws when you take money out. Draws reduce equity; they are not deductible.
- Oficina en casa and vehicle use, supported by records (square footage, mileage log).
- Estimated tax payments made from the business account are owner draws, not business expenses.
Estimated taxes and self-employment tax
SMLLC profit is subject to income tax and self-employment tax, and usually needs quarterly estimated payments. Monthly books give you real year-to-date profit to base estimates on. Our Planificación Fiscal Empresarial team calculates them.
When an S corporation election makes sense
Once profit is steady and substantial, electing S corporation taxation can reduce self-employment tax, in exchange for running payroll with a reasonable salary and filing a separate return. The decision depends on clean numbers. See our S-Corp tax filing page and the owner tax planner.
Getting help
Most single-member LLCs fit our Starter package, from $290 a month. If you'd rather keep the books yourself, a one-time Configuración de QuickBooks gives you a file built for Schedule C. Consultants and freelancers can read more on our consultant bookkeeping page.