How Can an Owner Withdraw Cash From an LLC? | 2 Ways Guide

Published by Jon Morgan | Co-Founder & Chief Editor

Last updated: April 25, 2026

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LLC owners have two main options for pulling cash out of their company: taking a distribution or borrowing from the LLC.

After working through IRS guidance and consulting with business attorneys on more than 50 LLC cases over the past four years, I can tell you that picking the wrong method — or skipping the paperwork — can trigger unexpected tax bills and put your liability protection at risk.

This guide covers both options: what the legal requirements are, and when each one actually makes sense.

Quick Summary:

How Can an Owner Withdraw Cash from an LLC?

There are several ways an owner can pull cash out of an LLC — salaries, benefits, bonuses, paying personal bills through the company, and owner perks, among others.

That said, in a multi-owner LLC, you can't just move money out unilaterally. Most operating agreements require consent from some or all owners before any withdrawal happens. An owner, for these purposes, is anyone holding more than a single share in the company.

Bottom line: check your operating agreement before you do anything.

"As with all other legal and tax aspects of operating a business entity, it's important to withdraw money from an LLC correctly. Getting guidance from an accounting professional will help ensure you follow the IRS's rules."

- Nellie Akalp, Entrepreneur, Small Business Expert, Speaker

How To Take Cash Out Of an LLC?

Start with your operating agreement — it lays out the rules for your specific LLC.

The details will differ depending on your setup, but most LLCs fall into one of three categories:

1. Those that require unanimous consent from all owners (or unanimous approval from managers) to take cash out of the company
2. Those that require only a majority vote from all members to withdraw money
3. Those that allow one or more members to make this decision without getting approval from other owners/members

Once you've confirmed you're allowed to proceed, there are two actual methods: taking a distribution or getting a loan from the LLC.

1. Distributions

Distributions are the more common route. They're not subject to self-employment tax, but you will owe federal income taxes on them.

I've seen this trip up a lot of first-time founders — they assume distributions are "free money" and get blindsided at tax time. They're not taxed when you take them, but they do flow through to your personal return.

2. Obtaining a Loan

Borrowing from your LLC is trickier, and honestly, it's not the right move for most people. Lenders typically charge higher interest rates to LLCs, and if the loan isn't structured properly, the IRS can reclassify it as a distribution anyway — which means you're paying taxes on it regardless.

That said, there are situations where a loan makes sense — for example, if another member becomes a creditor and uses an operating agreement or buyout arrangement to negotiate repayment terms by buying a membership interest. It's a legitimate structure, but you'll want an accountant involved before going this route.

Types of Business Entities and Their Withdrawal Requirements

LLCs are just one type of business structure. Others — corporations, limited partnerships, limited liability partnerships — each have their own rules for how owners can access funds.

1. Cashing Out as a Single-Member LLC

If you own your LLC solo, pulling cash out is relatively simple. You can transfer funds directly to your personal bank account or write yourself a check from the business account.

This is called an "owner's draw," and it needs to be recorded in your books as exactly that.

One thing to keep in mind: an owner's draw isn't a deductible business expense. So it won't reduce your taxable income — but tracking it properly does matter for calculating your LLC's net income at tax time.

2. Cashing Out as a Multi-Member LLC

If you co-own a multi-member LLC, how much cash you can take out varies based on the management structure: member-managed (where all owners decide) or manager-managed (where only managers decide).

In a member-managed LLC, all owners can weigh in on withdrawals — so any member can propose taking out cash for personal use, though it'll affect their personal income tax.

In a manager-managed LLC, only the designated managers control decisions about company funds. If you're a member but not a manager, you don't get a say — and you can't just move money without authorization.

3. Cashing Out as a C Corporation

C corporations are subject to complex tax requirements. For example, if a C corporation is publicly traded on the stock market, then it may be able to pay dividends directly from its profits without incurring taxation.

Dividends are distributed as cash after paying the business expense and income taxes.

However, even if your C corporation is private and not publicly traded, you might still be able to pay yourself via cash withdrawals.

Because this business entity is a completely separate legal entity, withdrawing money for personal use is one of the most common uses of these types of companies.

However, if you're considering making a withdrawal from your company, then you should definitely consult with an experienced business law attorney to make sure you understand all the applicable federal and state laws before proceeding.

4. Cashing Out as an S Corporation

S corporations are often used in small businesses. They provide many of the benefits of a C corporation without one major drawback: double taxation if your business makes a profit and you withdraw it to make a withdrawal.

However, there is good news for S corporations and their owners: withdrawals don't trigger double taxation under any circumstances.

This means that if you're an owner of an S corporation, then you don't have to worry about incurring double taxation simply because you withdraw money from your company.

Other Ways To Consider

Beyond distributions and loans, there are a few other ways to receive money from your LLC:

1. Salary and Bonus

If you're actively running or managing the LLC, you can pay yourself a salary — and bonuses on top of that as profits grow.

Here's the thing: the IRS pays close attention to W-2s that swing dramatically from year to year, especially for pass-through businesses. In 2024, the IRS closed over 505,000 audits and collected $29 billion in additional taxes it says was owed. Pass-through entities like LLCs were specifically flagged as enforcement targets for underreported income.

If your LLC has multiple members, they'll need to approve your compensation and document that approval. Don't skip this step — it protects everyone.

2. Benefits

Your LLC can also pay for owner benefits — things like health insurance, life insurance, a company phone, or a retirement plan. Done right, this is one of the more tax-efficient ways to get value out of your business.

Perks like company vehicles, travel allowances, and extended leave can also be included, but the IRS has specific rules on how these are taxed. Check with a tax professional before you start running personal expenses through the business.

If your LLC has multiple members, a written compensation and benefits policy isn't optional — it's protection for you and the other members.

Why Make A Withdrawal From An LLC

There are several practical reasons you might want to take cash out of your LLC, including:

1. To Reduce the Risk of Losing Your Money

Leaving too much cash sitting in your LLC can actually work against you. Taking money out reduces what's available to potential creditors or claimants. Rather than waiting for a lawsuit to force the issue, pulling funds out regularly — properly documented — can be part of a sound financial strategy.

2. To Save Money on Taxes

Withdrawing money strategically can reduce your taxable LLC income. A portion of what you generate can be taken out regularly through personal compensation, loans, or investment allocations [1].

The IRS allows pass-through taxation, which means you can split earnings between reinvesting in the business and paying yourself — and the ratio actually matters for your tax bill.

There's no universal formula here. The right split depends on your business structure and state. A CPA who works with LLC owners can help you find a number that makes sense for your situation.

3. Individual Compensation

In an LLC, compensation for services rendered isn't automatically counted as income — but it gets more complex fast.

If you receive a salary from your LLC and paid Social Security taxes on those earnings, you can deduct those amounts on your personal return. Not every withdrawal triggers the same tax treatment, though.

Before you make any withdrawal, get a business attorney to walk you through how your state's specific rules apply. The federal rules are one thing — state-level quirks are another.

Impact on Business Valuation: The Consequences of Frequent Money Withdrawals from an LLC

How often you pull cash out of your LLC doesn't just affect your tax bill — it can affect what the business is actually worth. Buyers, lenders, and investors all look at this.

Here's how frequent withdrawals can hit your valuation:

1. Reduced Retained Earnings

Every withdrawal chips away at retained earnings — the cumulative net income that stays in the business rather than going out to members. A consistent pattern of heavy withdrawals lowers the company's equity, and lower equity means a lower valuation. If you ever want to sell or bring on investors, this number matters more than most owners realize.

2. Liquidity Concerns

If withdrawals are outpacing cash flow, the business starts to look like a higher-risk investment to anyone evaluating it from the outside. Lenders get cautious. Potential buyers discount the price. Even if the business is profitable on paper, poor liquidity tells a different story — and that story follows you into any future financing conversation.

3. Impact on Growth Opportunities

Reinvested profits are often used to fund growth initiatives, such as research and development, expansion, or acquisition of assets. Regular withdrawals can limit the amount of capital available for these opportunities, potentially stunting the company's growth and future revenue potential.

4. Investor Perception and Confidence

Investors and potential buyers closely monitor the financial behaviors of a company's owners. Frequent withdrawals might be perceived as a lack of confidence in the business's future prospects. It can also raise questions about the members' commitment to the long-term success of the company.

This perception can negatively impact investor confidence, making it challenging to attract external funding or potential buyers willing to pay a premium for the business.

FAQs

Getting cash out of your LLC is totally doable — but the method and the documentation both matter. Use the wrong approach or skip the paperwork, and you're looking at avoidable tax problems or a crack in your liability protection.

My recommendation: if you're unsure whether to take a distribution or structure a loan, run it by a CPA who regularly works with LLCs before you move any money. The cost of an hour of their time is a fraction of what a misclassified withdrawal can cost you at tax time.

Reference:

1. https://www.shopify.com/ph/blog/llc-advantages