Small Business owners that pay contractors...

[Bades]

I own an LLC for my web design and I have a buddy that I will contract out the development part of it.

If a job is $4,000 and I owe my buddy $2,000. Does it matter if I pay him from personal check or from my business check?

[Bades]

I'm guessing it doesn't matter what account you pay it out of as long as you have a money trail recorded?

[siggy_freud]

Shouldn't really matter, just keep track of the money. If you have business checks, it would be simpler to do it that way. But in either case, you report it the same way on your taxes. It would really only matter in an audit where you paid him from, and even then so long as you can show the trail, you're okay.

Sole member LLCs are usually taxed as personal income anyways, so it's all your money one way or the other.

[Jon Spiels]

Business

Since he's working for your business, then it's best to get his salary out from it as well. You should set aside your personal money from your business one's so that you can actually breakdown smoothly everything that goes in and out of your business.

[scfr]

Pay by business check only .... Absolutely, no question about it! Do NOT mix your business and personal funds. One of the main reasons for establishing an LLC is to protect your personal assets. If you start mixing up the 2 you will have pierced the corporate veil and your personal assets will be at risk.

For tax purposes you may be OK either way, but from a personal liability standpoint you want to keep that wall of separation in tact. It is called "Limited Liability Company" for a reason.

Do not pay with a personal check!

P.S. - My husband has an LLC. I researched which form his business entity should take when he was getting ready to set up his business.

[siggy_freud]

Pay by business check only .... Absolutely, no question about it! Do NOT mix your business and personal funds. One of the main reasons for establishing an LLC is to protect your personal assets. If you start mixing up the 2 you will have pierced the corporate veil and your personal assets will be at risk.

For tax purposes you may be OK either way, but from a personal liability standpoint you want to keep that wall of separation in tact. It is called "Limited Liability Company" for a reason.

Do not pay with a personal check!

P.S. - My husband has an LLC. I researched which form his business entity should take when he was getting ready to set up his business.

This is a good point. From a tax perspective, it really doesn't matter much, as it's all your money. From a liability standpoint, he could make the argument that he was contracted with YOU and not your company, should he ever wish to file suit. A personal check would only help such a claim. Good catch.

[~bs]

Pay by business check only .... Absolutely, no question about it! Do NOT mix your business and personal funds. One of the main reasons for establishing an LLC is to protect your personal assets. If you start mixing up the 2 you will have pierced the corporate veil and your personal assets will be at risk.

For tax purposes you may be OK either way, but from a personal liability standpoint you want to keep that wall of separation in tact. It is called "Limited Liability Company" for a reason.

Do not pay with a personal check!

P.S. - My husband has an LLC. I researched which form his business entity should take when he was getting ready to set up his business.

I agree with this. It's always best to keep business and personal transactions separate.

[Bades]

Yeah I do keep everything separate.

When I pay myself I just make an easy transfer from Business account to personal account online.

I also issued him a W9 for his contracting work as well.

[Bades]

you will still have to file a tax return for the business, then another Schedule C & SE and pay self employment taxes on the 1099 income on your 1040

a lot of extra work (and cost if you are paying someone to do your tax returns) for ZERO benefit

if you are paying yourself as an "EMPLOYEE" (which can only be done if company is a C-corporation), you don't use 1099's - you have to withhold and deposit payroll taxes, and file quarterly payroll tax returns - Fed. state and unemployment .

I'm a pass-through entity LLC. It's see an a sole-proprietorship.