How does a business owner take money out of their business

Let's say I own a business selling widgets on the web. I'm incorporated, most likely an LLC. The business is doing really well and there is a lot of cash flow. Since I'm separated from the business by the LLC, how do I as the business owner reap the benefits of my successful online business? How do I take some of the profits out of the business?

There are two main ways an LLC owner can obtain money from the LLC:

1. Withdrawals: This is money distributed to the LLC owners after net profits have been calculated. You need to show a profit to take a withdrawal from the LLC. How withdrawals are taxed depends on whether the LLC is taxed as a partnership or a corporation (see more on that below).
2. Guaranteed Payments: In essence this is a form of salary. Owners receive guaranteed payments in exchange for work performed, and it is done so before profits. Because guaranteed payments are distributed pre-profit they are treated as a business expense and can be deducted as such. Also, guaranteed payments are received by the owner regardless of whether the LLC turned a profit or not.

These two methods have different tax implications, so speak to an attorney or accountant about these.

To make a point about Tim's comment, an LLC does not have to be a pass-through entity. An LLC can choose to be treated as a separate corporation for tax purposes. From the Nolo website :

If you will regularly need to keep a substantial amount of profits in your LLC (called "retained earnings"), you might benefit from electing corporate taxation. Any LLC can choose to be treated like a corporation for tax purposes by filing IRS Form 8832, Entity Classification Election, and checking the corporate tax treatment box on the form.