Question about distributions for LLC filing as S Corp

[Plarka]

I have an LLC and file as an S Corp, and I'm the only member and employee.  If I have been putting what people pay me into a personal savings account, does that mean I have taken distributions for myself?

If I had kept it all in a business savings account, sent from the business checking account, would I have been able to say I did not take distributions? Or do you automatically have to report all company income above your salary as distributions?

[DaveF1006]

Yes, as a S-Corp filer, you are required to take a reasonable salary.  Any profits above your salary is considered a distribution. The IRS considers any amount withdrawn and placed in a personal checking account after the salary is paid, as a distribution. 

If you kept your money in a business checking account, the money is not counted as a distribution as it would remain in the business. However, the income still needs to be reported on your personal tax return via the K-1, regardless of whether you withdraw it or not. 

[Plarka]

Thanks!  Would it save me money next year if I kept it in a business savings account so I wouldn't have to count it as a distribution, instead of a personal savings account?

[Opus 17 · Accepted solution]

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@Plarka wrote:

Thanks!  Would it save me money somehow if I kept it in a business savings account instead of personal and next year?

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It does not change your income tax at all.  But it may make it easier for other reasons to keep your business and personal finances separate. 

As an S-corp, you must pay yourself a fair market salary for the work you do.  It must be reported to the IRS on a W-2 as well as form 941 or 944, and is subject to social security and medicare tax withholding.  Also probably unemployment insurance, and anything else required by state law.   You can pay yourself weekly, or monthly or even only once a year, but you may pay yourself a salary before you take any other profit distributions.