Can a multi-member LLC transfer money out of its business bank account to an active member's bank account to pay for quarterly tax estimates?

[danielle-51]

This member is an active member (member-manager), and receives weekly guaranteed payments. We are trying to figure out what the quarterly tax estimates will be this year, because there will be a significant increase in the amount given out as a guaranteed payment. The amount given is what should cover all living expenses. We individually "set aside" weekly what is owed in taxes in order to be ready for each quarterly payment.  If you receive $1000 a week, do the taxes owed on that $1000 need to come directly out of that $1000 given? Or, can you give out that $1000 as a guaranteed payment, and then transfer an additional $200 for taxes owed on that $1000 to another account where it will remain until time to pay the tax estimate? The way I understand it now, is that the total $1200 would have to be given out as a guaranteed payment, so therefore instead of the guaranteed payment being $1000 a week, which would be enough to live on, it would need to become $1200. Taxes would be owed on the $1200, and not just the $1000. Is this the way it has to be done? Thank you

[Anonymous_]

Your post is somewhat confusing as the individual member would be responsible for paying any estimated tax, not the LLC.

[danielle-51]

Sorry for the confusion. It all seemed clear to me. We are a small family business, a multi-member LLC, and are just trying to get all of this sorted out for those of us who are new to tax estimates. We want to make sure the guaranteed payment can have enough set aside weekly for taxes, and then still have enough left for living expenses. But I see the confusion now. The LLC pays the guaranteed payment. Each member pays the taxes on that amount. We just need to get the amount of the guaranteed payment right, in order to cover the taxes on it, as well as living costs. Thank you.

[Anonymous_]

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@danielle-51 wrote:

We just need to get the amount of the guaranteed payment right, in order to cover the taxes on it, as well as living costs. Thank you.

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You are correct and most welcome.

[Carl]

do the taxes owed on that $1000 need to come directly out of that $1000 given?

Yes.

Or, can you give out that $1000 as a guaranteed payment, and then transfer an additional $200 for taxes owed on that $1000 to another account where it will remain until time to pay the tax estimate?

That would make the guaranteed payment amount $1,200 and they would owe/pay taxes on $1,200. What the recipient does with the extra $200 doesn't matter, but they'd be smart to set it aside for taxes.

I find that in my SCH C business, if I set aside and pay 20% of my gross business income each quarter, come tax filing time I'm easily within $1K of whatever my tax liability will be. But I do recommend that if there's a possibility the taxable income for the year will exceed $160K, they set aside 25%.  Also, don't forget about state taxes if applicable, as that would make the amount to bet set aside a little bit more.