Transfer of funds to LLC checking account - tax deductible?

Forum|Forum|7 years ago
June 5, 2019
2 replies
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In 2017 we started an LLC and transferred some money from our personal account to the LLC checkings account for initial funding. The LLC is a single-member so we report all income and expenses on our personal tax return.

My question is if that transfer of funds qualifies as a deduction in itself? If so I'm assuming it works the other way around as well - that is, if we transfer the money back to our personal checking account it would need to be reported as income?

Ideally I'd like to be able to transfer money back and forth between the two bank accounts without triggering a taxable event, and only deduct expenses / pay for income. But then I'm not sure how the IRS sees it.

Thanks in advance!

TurboTax Premier Online

VolvoGirl

Employee

A Single Member LLC is a disregarded entity. It is the same as you personally. It doesn’t matter which bank account (business or personal) or credit card you use. It’s all yours. You just enter the actual expenses you paid.

J

JulieH1

No.

You don't pay taxes on the money you put into the business and it is also not deductible.

The reason is that it is assumed that you have already paid taxes on that money. The money you put into the business is considered your equity in the business, not income. You will, however, have to pay taxes on your profit.

You should be deliberate in your transfers. If you get in the habit of moving small amounts of money from one account to the other for no apparent reason you could "pierce the corporate veil ". That means that the government could decide that you are not operating as a separate entity, and revoke your limited liability protection.

You can make loans to your business and charge interest, but that will trigger personal income from the interest earned and a deduction for the interest paid.