April 14, 2008 6:33 AM EDT
Yes, if you intend the money you gave your business to be a loan, then you should have loan documents including the payment schedule and interest rate and your business should pay you according to those documents.
You can only deduct losses to the extent of your basis. Your basis is the amount you paid for your stock (if any) and additional paid in capital (if any) and the amount that the company earned (if any) less any distributions you made to yourself (if any).
The year that you start your business, which sounds like it may have been 2007 - you don`t need income, just that you were open for business - you can elect to deduct up to $5,000 of start up costs and $5,000 of operating costs the first year (some exceptions apply). If done properly, anything disallowed would carryforward to 2008.
If you started your business in 2008, then you will deduct your expenses in 2008.
---Gina L. Gwozdz, CPA