"I can't find any IRS guidance on this real world situation"

That's like saying you can't find any fire department guidance on what to do with the building you put up without the required sprinkler system. 

OK, I'm sure @IRonMaN can come up with a better analogy. 

Tell us specifically what actions your client took, when.  Corporation or LLC? EIN requested?  Form 2553 filed?  First business activity?  First income received? First expense paid? 

Some businesses don't require any initial capital.  But the $20K deficit suggests both capital and shareholder loans would be involved.  Let me guess, he went to a seminar and decided he could DIY.  He probably should continue with that attitude, and do his own tax returns.  Or at least, not get you involved.