Personal Contributions to my business

[brownie45]

During the year I put money into our business from our personal account to keep it up and running. This year I want to repay myself for the money I loaned into the business. How do I do that without paying taxes as income? Or can I? I did not "formally" give the business a loan. I just transferred money from one account into the business account. Thank you in advance...

[veritas]

What kind of entity

is your business operating in?

[brownie45]

response

What is your question? Please clarify .

[veritas]

What type of entity is

your business?

corporation

partnership

sole proprietorship

other

[brownie45]

reply

It is a corporation. Sorry, I misread your last reply.

[taxxcpa]

Loan to corporation

The money you loaned would not be income to the corporation. It would be an Account Payable or Note Payable; i.e. a liability of the corporation.
Repayment would be a liquidation of the liability. It would not be income to you nor an expense to the corporation.
On the books you would intially record a debit to cash and a credit to a Payable acct.
When you paid yourself back, you would debit the Payable account and credit Cash.

[brownie45]

Thank you

Thank you so much for your time... I appreciate it very much.

[Zee]

Brownie-

As a Corporation, you do need to avoid personal cash infusions being classified as additional paid in capital by the IRS. If the infusion is determined to be additional paid in capital, the only way you can withdraw cash is as a dividend distribution or wages (both are taxable).

In the future, you can do this by properly documenting the loan, and authorizing the borrowing in the Corporate Minutes before the loan is made. The accounting entry is a debit to Cash, and credit to Officer Loans Payable.

Many small Corporations make the mistake of paying bills with personal credit cards, and additional cash infusions from the owners without proper documentation of the transactions. In your situation, I'd follow the previous advice and classify it as a loan. There is minimal risk, it could be questioned under audit so I'd document the intent for the monies to have been a loan.

[dsi]

Remember to keep your business affairs completely separate from your personal affairs. You may be the only SH of the corp, but you are still an employee. Keep things separate.