From a banking perspective, yes it is possible to transfer money from your business account to your personal account. Banks will not stop you from any transactions that you execute in the scope of the legal access and fund availability you have in any of these accounts.
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What is the Legal Implication?
However, the implication and consequences it will have on your company and on you as a private individual is a whole different story. In the United States, any private withdrawal from your business account will be regarded as you paying yourself a salary. Thus it has tax implications for you (income tax) as well as for the company (expenses).
Another factor to consider will be the general financial situation of your company. Have it in mind that there are limitations to what you can pull out of a company especially if it would render your company insolvent as a result. This is a fraudulent stunt people sometimes try to pull to exploit an LLC or a Corporation without becoming liable themselves.
It is always imperative to discuss the fine details and limits with an accountant, as the laws and regulations in each country and state vary. To transfer money from a business account to a private account, here is an overview of how that usually works:
How to Transfer Money from Different Business Entities Account to Personal Account
Note that the single owner of a single – member LLC can transfer money by taking an “owner’s draw”—writing themselves a business check or (if their bank allows it) transferring money from the LLC bank account to the owner’s personal bank account.
2. Multi – member LLC and C Corp
Each LLC member or any member of a C Corp has a capital account (a log of that member’s membership share of the company and their financial activities). When members need money, they take a draw from the company, which is accounted for in the capital account. Note those draws are usually made via a business check written out to the member.
3. S Corp
An S Corporation, for instance, is either an LLC or C Corporation that has elected for special tax treatment with the IRS. An S Corporation’s income, losses, deductions, and credits pass through to its shareholders’ personal federal income tax returns. The shareholders then report the business’s income and losses on their personal tax returns and are taxed at their individual income tax rates.
Even though LLCs and S Corps possess pass-through tax treatment in common, there’s a huge difference: An S Corporation’s shareholders who do substantial work for the S Corp are considered employees. Howbeit, the business is expected to put them on its payroll and compensate them through wages or salaries—from which income taxes, Social Security and Medicare taxes (FICA), unemployment taxes (FUTA), and possibly other taxes are withheld.
Therefore, the S Corp’s remaining profits are paid out in distributions to the company’s shareholders, who then report those distributions on their personal income tax returns. Unlike wages and salaries, distributions are not subject to FICA and FUTA taxes. However, remember that if distributions to any shareholder exceed that shareholder’s stake in the business, that excess amount will be taxed as a long – term capital gain.
In the United States, it is uncommon for S Corporation owners to run into trouble because they’ve paid themselves a suspiciously small salary and then take most of their compensation in the form of distributions to minimize the amount of FUTA and FICA payroll taxes they have to pay.
Note that both the IRS and Social Security Administration are vigilant in tracking down people who try to game the system this way. The government expects that S Corp owners will pay themselves a “reasonable salary,” which depends on the industry and the scope of the shareholders’ duties.
Even though the information shared above will help you understand how you can get paid as an LLC member, C Corporation or S Corporation shareholder, it is not a substitute for professional financial, tax, or legal advice. Always endeavour to ask a licensed accountant (and/or tax advisor) and attorney for guidance as you establish how your business will compensate you for your investments of time, money, blood, sweat, and tears.