The W-2 form details an employee's wages and tax withholding for a given year. In most cases, if you are the owner of a single-member limited liability company, you don't get a W-2 because you are not an employee of the company. As far as the Internal Revenue Service is concerned, you and the company are one and the same. The exception is when you have chosen to have your LLC treated like a corporation for tax purposes.
A single member LLC would likely only use a W-2 if it files its taxes as a corporation rather than a sole proprietorship.
LLCs Taxed as Proprietorships
The IRS will treat a single-member LLC like a sole proprietorship unless the LLC specifically asks to be treated like a corporation. When your LLC is treated like a sole proprietorship, you report all company revenue and expenses on Schedule C. You report the LLC's profit – revenue minus expenses – as income on your tax return. Also, since LLC profit is self-employment income, you must also file Schedule SE to calculate your self-employment taxes, which are Social Security and Medicare taxes. Employees who work for someone else have a portion of Social Security and Medicare taxes deducted from their pay while their employers pay the rest; if you're self-employed and you file for your LLC as a sole proprietorship, you are responsible for paying the full Social Security and Medicare.
LLCs Taxed as Corporations
Single-member LLCs do have the option of being taxed as a corporation. If you go this route, you can indeed "hire" yourself as an employee, pay yourself a salary and issue yourself a W-2 form. But understand that your company will have to withhold income and payroll taxes from your pay and send that money to the government. The company might also have to pay corporate income taxes in addition to the individual income taxes you'll be paying on your salary. Your company would file its own separate tax return rather than report its income on your personal Schedule C as it would do if treated as a sole proprietorship.
When You Have Employees
The tax treatment of your LLC affects only how you report your income as a company owner. The corporate form matters in that case, because it determines whether you issue yourself a W2 and have your taxes withheld or simply report all the income as yours on Schedule C with expense deductions. With respect to your own employees who have no ownership interest, they must be treated as regular employees whichever way you choose to be taxed. If you have employees, you must withhold and pay the proper taxes and supply your workers with W-2 forms just like any other employer, or issue 1099s for independent contractors.
Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens"publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.