How to Pay Yourself as a Creative Agency Owner (LLC & S-Corp)
- 2d
- 5 min read
Updated: 19h
Paying yourself as the owner of a creative or marketing agency in Florida, especially in Tampa, can be confusing. Many agency owners struggle to find the right balance between salary and distributions, often paying more taxes than necessary. Understanding how to pay yourself correctly can save you thousands of dollars in taxes and help your business run more smoothly.
This guide breaks down how to pay yourself if your agency is set up as an LLC or an S-Corp. It includes practical examples, tax insights, and answers to common questions for creative agency owners. Whether you run a branding studio, design studio, or marketing agency, this article will help you make smarter decisions about your income.
1) Understanding LLC and S-Corp Basics for Agency Owners
Before diving into payment methods, it’s important to understand the differences between LLCs and S-Corps, especially how they affect your pay and taxes.
LLC Owner Pay
Most LLCs are treated as pass-through entities for tax purposes. This means the business income passes through to your personal tax return. You don’t pay yourself a salary in the traditional sense. Instead, you take an owner’s draw, which is simply transferring money from your business account to your personal account.
An owner’s draw is not taxed at the time of transfer. You pay taxes on the net income of the business, not on the draws themselves. This setup is simple but can lead to higher self-employment taxes if you don’t plan carefully.
S-Corp Owner Pay
S-Corps require owners who work in the business to pay themselves a reasonable salary. This salary is subject to payroll taxes, including Social Security and Medicare. After paying yourself a salary, you can take additional money as distributions, which are not subject to payroll taxes.
Taking a salary can result in tens of thousands of dollars of unnecessary payroll tax paid to the IRS if not done correctly. All an "owner's draw" means is transferring money from the business account to your personal account—whether that's an ACH, wire, check, or Zelle. The best part about distributions is that there is no tax withheld on them! You are only taxed on the net income of the business, not the distributions you pay yourself.
For example, a $50,000 difference in salary/distribution split can result in $7,650 in overpaid payroll tax. That adds up to $38,250 overpaid over five years.
How to Pay Yourself as an LLC Owner
Step 1: Track Your Business Profits
Know your net income after expenses. This is the amount you can safely draw from the business without hurting cash flow.
Step 2: Take Owner’s Draws
Transfer money from your business account to your personal account as needed. There is no set salary or payroll tax on these draws. You pay income tax and self-employment tax on your share of the business profits, regardless of how much you withdraw.
Step 3: Set Aside Money for Taxes
Since taxes aren’t withheld on draws, you must save money for quarterly estimated tax payments. This includes federal income tax, state tax, and self-employment tax.
Example Scenario: LLC Owner Pay
Jessica owns a Tampa-based branding studio structured as an LLC. Her business earns $120,000 in net income annually. She takes $80,000 as draws throughout the year and leaves $40,000 in the business for expenses and growth.
Jessica estimates her tax liability and pays quarterly taxes to avoid penalties. She keeps detailed records of draws to track her personal income.
How to Pay Yourself as an S-Corp Owner
Step 1: Determine a Reasonable Salary
The IRS expects S-Corp owners who work in the business to pay themselves a reasonable salary based on industry standards and job duties. This salary is subject to payroll taxes.
Step 2: Run Payroll and Withhold Taxes
Set up payroll to pay yourself the salary regularly. Withhold federal and state income taxes, Social Security, and Medicare taxes.
Step 3: Take Distributions
After paying yourself a salary, you can take additional money as distributions. These are not subject to payroll taxes but are taxed as income on your personal return.
Example Scenario: S-Corp Owner Pay
Mark runs a marketing agency in Tampa as an S-Corp. His business earns $200,000 in net income. He pays himself a $100,000 salary, which goes through payroll with taxes withheld. Mark then takes $50,000 as distributions.
By splitting his pay this way, Mark saves thousands in payroll taxes compared to taking the entire $150,000 as salary.
Tips to Avoid Common Mistakes
Don’t skip payroll for S-Corp owners. The IRS can penalize you for not paying a reasonable salary.
Keep personal and business accounts separate. This helps with clear bookkeeping and tax reporting.
Plan for taxes. Set aside money regularly to cover income and payroll taxes.
Consult a CPA familiar with creative agencies. Local knowledge of Tampa and Florida tax rules can save you money.
Document everything. Keep records of salary payments, draws, and distributions.
Frequently Asked Questions
1. Can I pay myself only through owner’s draws as an S-Corp owner?
No. The IRS requires S-Corp owners who work in the business to pay themselves a reasonable salary subject to payroll taxes. Owner’s draws or distributions are allowed only after paying a salary.
2. How do I know what a reasonable salary is for my agency?
Look at industry standards for your role and location. Consider your duties, hours worked, and comparable salaries in Tampa’s creative and marketing sectors. A CPA can help benchmark this.
3. What taxes do I pay on owner’s draws?
Owner’s draws themselves are not taxed when taken. You pay income tax and self-employment tax on your share of the business profits, reported on your personal tax return.
4. Can I switch from LLC to S-Corp to save on taxes?
Yes, many agency owners elect S-Corp status for tax savings on payroll taxes. This decision depends on your business income and structure. Talk to a CPA to see if it makes sense for your agency.
5. How often should I pay myself?
LLC owners can take draws as needed, but it’s best to be consistent. S-Corp owners should run payroll regularly, usually monthly or biweekly.
6. What happens if I pay myself too little salary as an S-Corp owner?
The IRS may reclassify distributions as wages and assess back taxes and penalties. It’s important to pay a reasonable salary.
7. Do I need to pay state taxes on my salary and draws in Florida?
Florida does not have a state income tax, so you only pay federal taxes on your salary and draws.
Paying yourself correctly as a creative agency owner in Tampa, Florida, can make a big difference in your tax bill and business health. Whether you run an LLC or an S-Corp, understanding the rules around salaries, draws, and distributions helps you keep more of your hard-earned money.
If you want to avoid costly mistakes and optimize your pay, consider working with a CPA who knows the creative agency landscape in Florida. If you're interested in learning more about our Creative Agency Bookkeeping & Tax Strategy services visit this page.
Written by: Alex M. Riccio, CPA | Stronghold Accounting
