I Just Formed My LLC — Now What?

Short Answer: An LLC doesn't change how your business makes money, and on its own it doesn't change your taxes. What it does is start the clock on five money decisions: keeping business money separate, deciding how you pay yourself, setting aside taxes, pricing for profit, and holding enough cash to get through a slow stretch. Each one has a number behind it, and the owners who get them right are the ones who work the number out before deciding.

The confirmation email lands and the LLC is real. It feels like the hard part is over. In practice the filing was the easy part, because the decisions that come next are about money, and they compound. A pricing mistake in month two is still costing you in month twenty.

Does an LLC Change My Taxes?

Not by default. A single-member LLC is taxed like a sole proprietorship: the profit lands on your personal return, and you pay income tax plus 15.3% self-employment tax on it. A multi-member LLC is taxed as a partnership. The LLC is a legal wrapper that separates your personal assets from the business's debts. The tax treatment only changes if you elect it, most commonly by electing to be taxed as an S-Corp.

The Five Decisions

1. Separate the Money

Open a business bank account and run every business dollar through it. This isn't bookkeeping hygiene for its own sake. Mixed accounts are the most common reason owners can't answer basic questions about their own business, like what last quarter's margin was, and they weaken the liability protection the LLC was formed for.

2. Decide How You Pay Yourself

As a single-member LLC you take an owner's draw: money out of the business, not a salary, and not a business expense. The draw should come from a number, not from whatever is in the account. Start from what your household needs after tax, gross it up for taxes, and add what the business has to keep for equipment and a reserve. That total is the profit your business has to make.

3. Set Aside Taxes Every Time You Pay Yourself

No employer is withholding for you anymore. The IRS expects quarterly estimated payments, due in mid-April, mid-June, mid-September and mid-January. A common approach is to move a fixed share of every draw into a separate tax account: 25–35% is typical for owners in a state with income tax.

4. Price for Profit, Not for the Market Rate

Most new owners price by looking at competitors. The number that matters is gross margin, what's left of each dollar of revenue after the direct cost of delivering it. If the margin can't cover your overhead and your pay at a realistic volume, the price is wrong no matter what competitors charge.

5. Hold a Cash Cushion

Customers pay late, equipment breaks, and seasons turn. A business with no reserve makes its worst decisions under pressure. Decide on a target, such as two to three months of fixed costs, and build toward it before raising your own pay.

A Worked Example: The S-Corp Question

Take a hypothetical landscaping company, Greenline Landscaping, run as a single-member LLC. It makes about $114,000 in profit a year before paying the owner. The owner hears an S-Corp election would save money and wants to know if it's worth it.

As a sole proprietorship, self-employment tax applies to almost all of that profit:

As an S-Corp, the owner pays themselves a salary through payroll and takes the rest as distributions. Payroll taxes apply only to the salary. If a reasonable salary for the work is $60,000:

That's roughly $6,900 a year less in payroll-type taxes. Against it go the costs of running payroll and filing a separate business return, often a few thousand dollars a year, plus changes to other deductions. At Greenline's profit, the election likely pays. At $40,000 of profit it usually doesn't. The salary is the number to get right: set too low and the IRS can reclassify distributions as wages.

What to Look For

• Draws against the profit target. If you take more than the plan says, the difference is coming out of your reserve or your tax money.
• The tax account balance before each quarterly deadline. It should already hold the payment. If you're finding the money the week it's due, the set-aside share is too low.
• Gross margin by what you sell. Owners are often surprised which service or product actually pays for the business, and which one it subsidizes.

What a Finance Consultant Would Do Next

A consultant sitting down with Greenline's owner in the first month would set the draw from the household number, size the quarterly tax payments, check which services carry the margin, and run the S-Corp math at next year's expected profit rather than this year's.

That analysis is what Occam's Model runs on your own numbers. It works out what your business has to earn to support your household after tax, models your taxes under the election you choose (sole proprietorship, S-Corp or C-Corp), and lets you test a price change or a new cost before you commit to it. When you need extra help, an expert can review it with you.

Common Questions

Do I need a separate bank account for my LLC?
Yes. It keeps your records clean enough to make decisions from, and mixing personal and business money can weaken the liability protection the LLC provides.

How do I pay myself from a single-member LLC?
With an owner's draw: a transfer from the business account to your personal account. It isn't a business expense, and no taxes are withheld, so set aside tax money every time you take one.

When should my LLC elect S-Corp status?
Usually once profit is high enough that the payroll-tax savings on distributions clearly exceed the extra cost of running payroll and a separate return. Many owners find that point somewhere around $60,000–$80,000 of profit, but it depends on your state and a reasonable salary for your work.

How much should I set aside for taxes as a new LLC owner?
25–35% of what you pay yourself is common, depending on your state and income. Pay it in quarterly estimates rather than all at once in April.