LLC and mingling

"Mahesh" 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') ?

-Antony

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.

Yeah, for a non-tax reason.

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.

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.

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.

I didn't see the question as being so specific.

messagenews:Xns9CF1697168B6Aspamtraplexregiacom@130.133.4.11...

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.

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.

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.

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.