Forums: Discussions for entrepreneurs and small business.

Hi all,

I recently formed an LLC with two other partners and just opened a bank account, into which we`ve deposited most our startup funds.

My question is how should I deal with the expenses for the business that have already been paid out of my personal checking account? Should I have the LLC reimburse me, or should I just leave them as-is as personal expenses for business purposes (I assume they`d still be tax-deductible)? Any ideas?

Have the LLC write you a check for those expenses which you can truly deduct. Be careful of conversion - the idea of `selling` equipement you personally acquired to the company which was not used exclusively for the business (i.e computer, fax, etc). The IRS looks at those expenses closely to determine write-off qualifications.

Once the expenses are in the LLC, the LLC can deduct them against LLC income. You can always change the allocation of net income or loss of the LLC - it doesn`t have to follow the same %`s as the LLC ownership does. In other words, you have 4 partners, thus 20% ownership each. At the end of the tax year, you and the other partners can decide who gets the income or loss for their individual tax returns. The LLC doesn`t file it`s own return.

Hope that helps.

Jeff`s on the mark as far as having the LLC reimburse you.

However, a multi-member LLC must file a tax return. By default it`s a partnership return, although the LLC can elect to be taxed as C-Corp or S-Corp.

A single-member LLC does not file a separate return unless it has elected to be taxed as corporation.

Scott Reynolds

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R Scott Reynolds, CPA
www.b2bcfo.com

Scott,

Good catch. I forgot this was a multi-member LLC. I guess I`m just so glad my return and my LLC`s income statement are done, I wasn`t paying attention!

Very much so. Thank you.