Llc

[GoIsotopes]

2 LLC Questions (sole prop):

1. If I provide my own LLC money, can I make that a loan and charge my LLC interest? Money used for down payments on real estate investments.

2. Can I debit both principal and interest payments before computing the loss and transferring to 1040?

[JoshinNC]

I don't think so.

If your LLC is taxed as a sole prop than you and the LLC are one entity, and you therefore cannot loan money to yourself.

You definately would not deduct the principal payments, whether a SMLLC, MMLLC or corp.

[GoIsotopes]

thanks thanks

[jainen]

Yes, you can

>>If I provide my own LLC money, can I make that a loan and charge my LLC interest?<<

Yes, you can. It's your money, and you can do whatever you want with it.

If you want to know the tax effects of doing that, you will have to provide more information about the entity and the transaction, and ask a particular question about it.

[JoshinNC]

go back and read the original post

>>If I provide my own LLC money, can I make that a loan and charge my LLC interest?<<

Yes, you can. It's your money, and you can do whatever you want with it.

If you want to know the tax effects of doing that, you will have to provide more information about the entity and the transaction, and ask a particular question about it.

It said sole prop. This means the LLC has not elected corp taxation, so the owner cannot make a loan to himself. If corp taxation is elected than it's a different story.

[jainen]

on your tax return

>>the owner cannot make a loan to himself<<

He certainly CAN make a loan to himself! It's one of the most common arrangements in household and small business budgets. Of course, the tax system won't recognize it as a business transaction. That shouldn't be a problem--the tax system doesn't even recognize the LLC, but he can still do all sorts of things with it.

Don't define economics only in terms of taxation. If the only way to make something work is to get a tax break for it, it almost certainly is not a good idea. Business decisions should have their own internal justification. You can't fix a problem just by putting it on your tax return.

[JoshinNC]

I'm not going to argue this with you

But, if an individual provides money to his sole prop it's not a loan, tax wise, economically or in any other way. Period. You can't do it!

[jainen]

somebody else will

>>I'm not going to argue this with you<<

Darn! Maybe somebody else will.

[jainen]

Social Security Trust Fund

>>It's one of the most common arrangements in household and small business budgets.<<

As a matter of fact, it's even MORE common in big business and government. What else do you think happened to the Social Security Trust Fund?

[rosieea]

Personal money put into a sole proprietorship is a contribution, and money withdrawn from it is a draw. But you can choose to call these transactions anything you want, and my clients often characterize them as "loans" and "loan repayments." I couldn't care less; they get booked in and out of the drawing account. They can even pay themselves "interest," which is nothing more than an additional draw and doesn't show up as interest income to the taxpayer nor as a deduction for the proprietorship.

[jainen]

Exactly

>>call these transactions anything you want<<

Exactly. The business person has do whatever is necessary to prosper. The tax preparer has to interpret it in terms of the tax code.