Start-up capital deduction?

Hey everyone! Been a while since I was on. I want to know what to expect come tax time. I started my L.L.C., and have a business checking account for it. For the entire year of 2009, I have been and will continue to put a monthly allotment of my personal money into the biz account. When I file my return this February, will that be tax deductible? I am sure they can tell me at H&R Block, but I like to know things ahead of time. I appreciate any responses!

Claude Hodge

Edited: 06/26/2010 at 10:04AM

Jon Holdman

Real Estate Investor · Denver, Colorado

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Icon_minipost Oct 13 '09, 10:25 PM

If I understand correctly, you're talking about money you're moving from a personal account into your LLC business account. That won't show up on your taxes at all. Money the LLC actually spends will become a deduction. LLCs are pass through entities for tax purposes. Their expenses and income move to your personal return. So, moving money between the LLC's checking account and your personal checking account is irrelevent for tax purposes.

I'd find a real CPA, not just an H&R block tax preparer. You need real advice and guidance, not just someone to fill in the blanks. Find a CPA who invests in real estate, or who has clients who invest in real estate.

Edited: 06/26/2010 at 10:04AM

Jon Holdman, Flying Phoenix LLC

Brian Levredge

SFR Investor · Long Beach, California

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Icon_minipost Oct 13 '09, 11:47 PM

Jon is right. How that money is treated depends on how you choose to label the transfers. If you haven't done any actual business with the LLC, then you might want to consider calling the money you've put into the account a loan that is payable back to you at a reasonable interest rate. Either that, or stock purchases. You need to be careful about putting your own money in every month because that could be seen as comingling and that would pierce your corporate veil.

Edited: 06/26/2010 at 10:04AM

Dave T

Real Estate Investor · South Carolina

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Icon_minipost Oct 14 '09, 11:46 AM

Originally posted by Brian Levredge

Either that, or stock purchases.

Brian,

LLCs don't issue stock, LLCs have members not shareholders.

Edited: 06/26/2010 at 10:04AM

Brian Haskins

Real Estate Coach · St. Louis, Missouri

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Icon_minipost Oct 14 '09, 03:27 PM

You need to get tax advice from an accountant. I would think though that it would be a write off though.

Brian Hakins

Edited: 06/26/2010 at 10:04AM

Claude Hodge

Real Estate Investor · Castle Rock / Ft. Carson, Colorado

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Icon_minipost Oct 16 '09, 01:52 PM

Thanks for the response fellas. I have not done any business yet with the L.L.C., so I am good there. I did plan on talking to a CPA once I am fully in the swing of things. I think I have a handle on it for now though. Thanks again!

Claude Hodge

Edited: 06/26/2010 at 10:06AM

Dave T

Real Estate Investor · South Carolina

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Icon_minipost Oct 17 '09, 02:21 AM

Originally posted by Brian Haskins

You need to get tax advice from an accountant. I would think though that it would be a write off though

Brian,

Jon's earlier response was correct. Contributions to your LLC are not deductible -- neither for the business nor for yourself.

Deductions arise because expenses have been incurred. If the LLC has not spent any money, then there are no business related deductions on behalf of the LLC. As a cash basis taxpayer, you can not deduct money you have not spent

Edited: 06/26/2010 at 10:07AM by Dave T