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Startup Small Business

nanuetnupe
Level 2

What is the ideal way to deal with a LLC startup were personal funds are used to pay business expenses?

Should the personal expenses labeled as owner's investment, or should be labeled some type of other expense?

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qbteachmt
Level 15

All funds are considered to be personal to the owner. Bank or Cash or Credit Card or whatever, doesn't make them Business.

The Spending is treated the same way. What got purchased is what is reported, when it is a business activity. How it got purchased doesn't control if that is Business or not.

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sjrcpa
Level 15

Where personal funds are used to pay business expenses, the owner has either made a loan to the business or has contributed capital to the business. Ask him which.

If personal expenses are paid from business funds (which should not be done), it is a draw/distribution.

I'm not sure if you're asking about one or both. 


ex-AllStar
nanuetnupe
Level 2

Owner contributed capital to the business.

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qbteachmt
Level 15

"What is the ideal way to deal with a LLC startup were personal funds are used to pay business expenses?"

The business expenses don't get treated any differently, just because personal funds were put into the business so that the expenses could be paid.

"Should the personal expenses labeled as owner's investment, or should be labeled some type of other expense?"

You don't track personal expenses for business recordkeeping at all. You would track Draws; the owner took funds to be used personally and it does not matter why or on what.

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nanuetnupe
Level 2

Thanks qbteachmt; I was asking for tracking the expenses for business deduction

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qbteachmt
Level 15

All funds are considered to be personal to the owner. Bank or Cash or Credit Card or whatever, doesn't make them Business.

The Spending is treated the same way. What got purchased is what is reported, when it is a business activity. How it got purchased doesn't control if that is Business or not.

*******************************
"Level Up" is a gaming function, not a real life function.

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BobKamman
Level 14

The best way is to start out asking if the LLC has elected to be taxed as a sole proprietorship, a partnership, a C Corporation or an S corporation.  That's usually when you find out they are clueless and made absolutely the wrong choice, mostly out of ignorance.  

nanuetnupe
Level 2

LLC elected to be taxed as a sole proprietorship

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