Bookkeeping for LLCs depends on how the LLC is taxed. A single-member LLC is usually reported on the owner’s Schedule C, a multi-member LLC files a partnership return on Form 1065, and an LLC taxed as an S corporation files Form 1120-S and pays its working owners through payroll. Whatever the tax setup, every LLC needs its own bank account, a record of every transaction with the paperwork behind it, and books reconciled to the bank each month.
Forming the LLC with your state does not change any of that by itself. The LLC is a legal wrapper; the IRS looks at how it is taxed, and the books follow the tax return.
Do LLCs have to keep books?
Yes. The IRS expects every business, whatever its legal form, to keep records that support the income, expenses and credits on its return, and to keep them for as long as they may be needed (IRS Publication 583). In practice that means:
- Books that show every transaction: what came in, what went out, and what each item was for.
- The paperwork behind them: bank and card statements, invoices, receipts, deposit records, and the forms you send and receive, such as 1099s and W-2s.
- A clear line between the LLC and you: what you put into the business, and what you took out.
Your state’s LLC law and your operating agreement may add their own record rules, such as keeping a current list of members. The owners of a multi-member LLC usually agree in the operating agreement how profits are shared, and the books have to follow it.
LLC bookkeeping requirements by how you are taxed
By default, the IRS treats a one-owner LLC as a “disregarded entity” that is part of the owner’s own return, and an LLC with two or more members as a partnership. Either can choose to be taxed as a corporation instead, and an LLC that elects S corporation status files Form 2553 to do it. Here is what each setup changes in the books:
| What changes | Single-member LLC | Multi-member LLC | LLC taxed as an S corp |
|---|---|---|---|
| How the IRS treats it | Disregarded entity, by defaultTaxed as part of the owner | Partnership, by default | Corporation with an S electionElected on Form 2553 |
| Federal tax return | Usually Schedule C on the owner’s Form 1040Schedule E for rentals, Schedule F for a farm | Form 1065, plus a Schedule K-1 for each member | Form 1120-S, plus a Schedule K-1 for each shareholder |
| How owners take money | Owner draws | Draws, and guaranteed payments if the members agree them | A salary through payroll, then distributions |
| Payroll for the owners | NoThe owner pays self-employment tax instead | NoPartners are not employees | YesReasonable pay before distributions |
| What else the books track | Draws and contributions in owner’s equity | A capital account for each member | Owner payroll, payroll taxes and distributions, kept apart |
An LLC can also elect to be taxed as a C corporation; this guide does not cover that setup. Whether an election suits your LLC is a question for your tax preparer: this guide only covers what each setup changes in the books.
A separate business bank account
The IRS puts it simply in Publication 583: open a business checking account, and “keep your business account separate from your personal checking account.” For an LLC there is a second reason. Mixing personal and business money can weaken the liability protection the LLC was formed to give you, which is why lawyers advise against it.
- One business checking account and one business card carry everything the LLC earns and spends.
- Money you put in is recorded as an owner contribution, not as income.
- Money you take out is recorded as a draw or distribution (or as wages in an S corp), not as an expense.
- A personal purchase on the business card is recorded as a draw, and better still, repaid or avoided.
Owner draws vs payroll
How you pay yourself depends on the tax setup, not on the LLC itself.
Single-member and multi-member LLCs
Owners take draws. A draw is not a salary and not an expense: it is a withdrawal of profit, recorded in owner’s equity. It does not reduce the LLC’s profit, and the owner pays income tax and self-employment tax on their share of the profit whether or not they draw it, the same way a sole proprietor does. Partners who are paid a fixed amount for their work, regardless of profit, receive guaranteed payments, which the partnership records separately and reports on each partner’s K-1. Neither kind of owner goes on payroll: the IRS says partners are not employees and should not get a W-2.
| Line | 2026 |
|---|---|
| Owner’s equity, January 1 | $18,400 |
| Owner contributions | $5,000 |
| Net profit for the year | $64,300 |
| Owner draws | ($52,000) |
| Owner’s equity, December 31 | $35,700 |
The $52,000 of draws sits here, not on the profit and loss. The owner’s tax is worked out on the $64,300 profit, not on the draws.
Example only: a made-up business. The figures add up but belong to no real client.
An LLC taxed as an S corp
Here the working owners are employees of their own company. The IRS says an S corporation must pay a shareholder-employee reasonable compensation for their work before it makes non-wage distributions. So the owner’s pay runs through payroll, with withholding and payroll tax filings, and anything taken beyond it is recorded as a distribution.
If your LLC is taxed as an S corp
The day-to-day bookkeeping is the same as for any LLC. What the S election adds:
- Owner payroll: regular pay runs, payroll tax deposits, quarterly payroll filings and a W-2 for each owner-employee at year end.
- Distributions kept apart from wages, recorded for each shareholder.
- Expenses you pay personally for the business, such as a phone or mileage, reimbursed and documented rather than mixed in.
- A year end built for Form 1120-S: a balance sheet that ties out, and a K-1 for each shareholder.
If you need the payroll side handled too, see our payroll for S corp owners and other employers.
How long to keep records
The IRS ties most record keeping to how long it can still question a return. Its guidance on how long to keep records:
- 3 years
- Most income tax records, from the date you filed the return.
- 4 years
- Employment tax records, after the tax was due or paid, whichever is later.
- 6 years
- If you left out income worth more than 25% of the gross income on the return.
- 7 years
- If you claimed a loss from worthless securities or a bad debt deduction.
- Longer
- Records for equipment, vehicles and property: until the period runs out for the year you sell or dispose of them. Indefinitely if a return was never filed.
Your lender, your insurer or your state may ask you to keep some records longer. Accounting software keeps the books themselves for as long as the subscription runs, so keep a year-end copy of the reports too.
Do you need a bookkeeper for your LLC?
No law says an LLC must hire one. Whether you should depends on how much is going on, and how much of your time the books take.
You can probably keep the books yourself if…
- It is a single-member LLC with one business account and one card
- A few dozen transactions a month, mostly the same ones
- No employees, no inventory and no sales tax to file
- You reconcile every month, not every spring
Get help if…
- There are two or more members with capital accounts to keep straight
- The LLC is taxed as an S corp and pays you through payroll
- You collect sales tax or carry inventory
- Personal and business money have been mixed
- You are months behind, or a lender or partner needs reports
If you use QuickBooks or Xero, the software does part of the work but not all of it; see what the software does and does not do.
What LLC bookkeeping costs
With us, the Starter plan from $150 a month suits most single-member LLCs with one main sales channel: monthly bank and card reconciliation, categorized transactions, a monthly profit and loss and balance sheet, email support and a named point of contact. An LLC taxed as an S corp that runs owner payroll usually fits Growth, from $350 a month, which adds payroll processing and filings, sales-tax filing, tax preparation and a monthly review call.
Each is a fixed monthly fee, confirmed after a short look at your volume and complexity. If your volume grows a lot, we talk first, and any change is agreed with you in advance and is usually small. There is no long contract: cancel any time, effective immediately. If the books are behind, catching them up is quoted as a fixed price before any work starts. For what bookkeepers charge more widely, see how much a bookkeeper costs.
Frequently asked questions
Do I need a bookkeeper for my LLC?
Not by law. Every LLC has to keep records that support its tax return, but no rule says a bookkeeper must keep them. A simple single-member LLC can manage on its own; partners, payroll, inventory or sales tax are usually the point where owners hand it over. For the general question, see do I need a bookkeeper?
Can I do my own LLC bookkeeping?
Yes. Use accounting software, run everything through the business account, keep receipts, record draws and contributions in equity, and reconcile every account to its statement each month. It gets harder with more members, payroll or inventory, and that is where mistakes tend to start.
Does a single-member LLC need a separate bank account?
In practice, yes. The IRS tells every new business to open a business checking account and keep it separate from personal money, and mixing the two can weaken the liability protection the LLC was formed for. It also makes the books far quicker to keep.
How do I pay myself from my LLC?
It depends on how the LLC is taxed. Owners of a single-member or multi-member LLC take draws, recorded in equity, and pay self-employment tax on their share of the profit. If the LLC is taxed as an S corp, working owners are paid a reasonable salary through payroll first and can take distributions on top.
Is LLC bookkeeping different for an S corp?
The daily recording is the same. On top of it, the books carry owner payroll and payroll taxes, distributions kept apart from wages, and a year end that supports Form 1120-S and a K-1 for each shareholder.
Not sure your LLC’s books are set up right? A free books review tells you. Add us as your accountant, and within about 48 hours you get a written list of what is misclassified or unreconciled, including draws or personal spending booked in the wrong place. It is free, yours to keep, and nothing in your books changes.