LLC and mingling
Mahesh
I formed an LLC for my rental business. It took me 2 months to get my
LLC bank account setup (due to multiple reasons). So the first rent
checks I received went into my personal account.
Also I incurred expenses repairing the rental units I acquired. These
expenses came out of my personal account.
Now that my LLC bank account is set up, how can I rectify the mixing
of funds? One step I have taken is to write a personal check to my LLC
for the rents that went into my personal account.
However, my LLC account does not have the funds to pay me for all the
repair costs.
Thanks
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paulthomascpa
"Mahesh" <mash...@gmail.com> wrote
> I formed an LLC for my rental business. It took me 2 months to get my
> LLC bank account setup (due to multiple reasons). So the first rent
> checks I received went into my personal account.
>
> Also I incurred expenses repairing the rental units I acquired. These
> expenses came out of my personal account.
>
> Now that my LLC bank account is set up, how can I rectify the mixing
> of funds? One step I have taken is to write a personal check to my LLC
> for the rents that went into my personal account.
>
> However, my LLC account does not have the funds to pay me for all the
> repair costs.
For a single member LLC, it's a disregarded entity for tax purposes, all
revenues and expenses are reported on your personal return on Schedule E.
Just combine the total rents received and total the various expenditures
accordingly regardless of which account they were paid from and file away.
--
Paul Thomas, CPA
www.paulthomascpa.com
Antony
> For a single member LLC, it's a disregarded entity for tax purposes, all
> revenues and expenses are reported on your personal return on Schedule E.
> Just combine the total rents received and total the various expenditures
> accordingly regardless of which account they were paid from and file away.
an LLC would that get any different tax treatment (as opposed to 'single
member') ?
-Antony
Wallace
"paulthomascpa" <paultho...@bellsouth.net> wrote in message
news:L_mdnYrSRYiZzKbW...@giganews.com...
>
> "Mahesh" <mash...@gmail.com> wrote
>> I formed an LLC for my rental business. It took me 2 months to get my
>> LLC bank account setup (due to multiple reasons). So the first rent
>> checks I received went into my personal account.
>>
>> Also I incurred expenses repairing the rental units I acquired. These
>> expenses came out of my personal account.
>>
>> Now that my LLC bank account is set up, how can I rectify the mixing
>> of funds? One step I have taken is to write a personal check to my LLC
>> for the rents that went into my personal account.
>>
>> However, my LLC account does not have the funds to pay me for all the
>> repair costs.
>
>
>
>
>
> For a single member LLC, it's a disregarded entity for tax purposes, all
> revenues and expenses are reported on your personal return on Schedule E.
> Just combine the total rents received and total the various expenditures
> accordingly regardless of which account they were paid from and file away.
Bad idea. The LLC was set up as a separate legal entity for a reason. The
fact the IRS treats the LLC as a disregarded entity for TAX purposes does
not change the reason the LLC was set up.
You need to pay the LLC the rents you received into your personal account.
You need to have the LLC reimburse you for the repair costs you paid out of
your personal account. If there is not enough money in the LLC to do so,
you need to document a loan from you personally to the LLC (and, to keep
things simple, pay off that loan as soon as you can). Alternatively, you
can increase the capital of the LLC so it will have enough funds to pay you
back.
Stuart A. Bronstein
> "paulthomascpa" <paultho...@bellsouth.net> wrote
>> For a single member LLC, it's a disregarded entity for tax
>> purposes, all revenues and expenses are reported on your
>> personal return on Schedule E. Just combine the total rents
>> received and total the various expenditures accordingly
>> regardless of which account they were paid from and file away.
>
> Bad idea. The LLC was set up as a separate legal entity for a
> reason.
Yeah, for a non-tax reason.
> The fact the IRS treats the LLC as a disregarded entity
> for TAX purposes does not change the reason the LLC was set up.
The question was with respect to bookkeeping for tax purposes.
Technnically the answer above was correct, though not necessarily
the optimal way to do things.
> You need to pay the LLC the rents you received into your
> personal account. You need to have the LLC reimburse you for
> the repair costs you paid out of your personal account. If
> there is not enough money in the LLC to do so, you need to
> document a loan from you personally to the LLC (and, to keep
> things simple, pay off that loan as soon as you can).
> Alternatively, you can increase the capital of the LLC so it
> will have enough funds to pay you back.
Yes, that would be best. And if this was not a new LLC and failure
to keep up the legal formalities the situation would be more
serious. But for a new LLC in its initial months there is more
flexibility. Certainly OP needs to do a little more than initially
proposed - but not a whole lot.
--
Stu
http://downtoearthlawyer.com
Arthur Kamlet
Antony <spam+lisp...@gmail.com> wrote:
>paulthomascpa wrote:
>> For a single member LLC, it's a disregarded entity for tax purposes, all
>> revenues and expenses are reported on your personal return on Schedule E.
>> Just combine the total rents received and total the various expenditures
>> accordingly regardless of which account they were paid from and file away.
>I don't have any LLC yet. But I am curious, if a married couple creates
>an LLC would that get any different tax treatment (as opposed to 'single
>member') ?
A married couple forming an LLC will file a partnership return
Form 1065 which then issues each partner a Schedule K-1.
If you are in a community propertystate you might not have to
do this.
The recently created concept of a "Qualified Joint Venture"
does not apply to an LLC.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
Wallace
"Stuart A. Bronstein" <spam...@lexregia.com> wrote in message
news:Xns9CF1697168B6As...@130.133.4.11...
> "Wallace" <please...@microsoft.com> wrote:
>> "paulthomascpa" <paultho...@bellsouth.net> wrote
>
>>> For a single member LLC, it's a disregarded entity for tax
>>> purposes, all revenues and expenses are reported on your
>>> personal return on Schedule E. Just combine the total rents
>>> received and total the various expenditures accordingly
>>> regardless of which account they were paid from and file away.
>>
>> Bad idea. The LLC was set up as a separate legal entity for a
>> reason.
>
> Yeah, for a non-tax reason.
>
>> The fact the IRS treats the LLC as a disregarded entity
>> for TAX purposes does not change the reason the LLC was set up.
>
> The question was with respect to bookkeeping for tax purposes.
I didn't see the question as being so specific.
Mahesh
> "Stuart A. Bronstein" <spamt...@lexregia.com> wrote in messagenews:Xns9CF1697168B6As...@130.133.4.11...
>
>
>
> > "Wallace" <pleasenos...@microsoft.com> wrote:
> >> "paulthomascpa" <paulthomascp...@bellsouth.net> wrote
>
> >>> For a single member LLC, it's a disregarded entity for tax
> >>> purposes, all revenues and expenses are reported on your
> >>> personal return on Schedule E. Just combine the total rents
> >>> received and total the various expenditures accordingly
> >>> regardless of which account they were paid from and file away.
>
> >> Bad idea. �The LLC was set up as a separate legal entity for a
> >> reason.
>
> > Yeah, for a non-tax reason.
>
> >> The fact the IRS treats the LLC as a disregarded entity
> >> for TAX purposes does not change the reason the LLC was set up.
>
> > The question was with respect to bookkeeping for tax purposes.
>
> I didn't see the question as being so specific.
>
I guess I should have asked this from both a tax and legal aspect.
Based on the replies, it seems that if I account for this accurately,
the IRS would not care to which account the money was deposited.
>From a legal perspective, I am trying to avoid "piercing the LLC
veil". So it seems like I should have seeded the LLC with additional
funds (I created a bank account with $1500 and transferred the rental
to the LLC via quit claim deed).
Seems like this part of the discussion is beyond the scope of this
group (since it is gets into legal aspects).
Appreciate the responses. Thanks.
Stuart A. Bronstein
> Based on the replies, it seems that if I account for this
> accurately, the IRS would not care to which account the money
> was deposited.
Right in general. If you're audited it's a little harder to prove
the expenses are related to the business if they come from your
personal account. But if you can prove it, there shouldn't be a
problem on that score.
>>From a legal perspective, I am trying to avoid "piercing the LLC
> veil". So it seems like I should have seeded the LLC with
> additional funds (I created a bank account with $1500 and
> transferred the rental to the LLC via quit claim deed).
One of the things that will influence a court to allow pierceing
the corporate veil is under-capitalization. I don't know what the
amounts are, so you may want to check with your CPA about it, but
at least some of what you put into the company should be treated as
a capital contribution, and the rest can be treated as a loan that
can be repaid when the company has the funds.
But as long as things are being handled properly when something
happens that causes you to be sued, I wouldn't worry about it too
much - it's unlikely to be a problem in that case.
--
Stu
http://downtoearthlawyer.com