LLC start up costs--reimburse?

8 Replies

I know this is kind of an odd question, but is the LLC required to reimburse me for its start up costs (since I paid for those in my own name)?

For example, the formation company offered a discount for buying multiple years of registered agent service, which I paid for with a credit card that's in my own name. Since this was done before the LLC existed, can I just leave it as is, or does the LLC need to reimburse me for that expense? Thanks.

Interesting question. My guess (emphasize guess) is any funds you personally disbursed are considered a capital contribution. Once your LLC makes money and has retained earnings, you can take a draw to "pay back" what you contributed. The sticky part is where you place all these payments on your tax return.

I'm not a CPA, but I'd guess that there is no requirement for the business to repay you for formation costs and that by not repaying yourself, you're not at risk of commingling. That said, if you want to get repaid, treat it as a loan, and repay the loan to yourself from company funds (well documented, of course).

That is what I think too. Can a CPA answer questions of this sort (i.e. about co-mingling and the corporate veil)? I need to go to the CPA anyway at some point within the next few months so I would like to kill two birds with one stone and ask him or her about this issue.

I'm happy to answer this question as it is an easy one. Your expenses are considered a capital contribution to the business. When you pay yourself back you will not have to do it as a loan. You may simply either: 1) issue yourself a documented reimbursement by making a detailed list of what you are being reimbursed for and include the receipts in your records OR 2) you may just pay yourself a distribution at any point as a draw from the capital account.

Either way you are not commingling funds; you just have to be sure to document that the contribution was made to the business, and/if you take a draw for the amount contributed you document it correctly by paying yourself with a check from the business.

-Steven the Tax Guy

Your guide to IRS laws, rules, and regulations.

Originally posted by Steven Hamilton II:
I'm happy to answer this question as it is an easy one. Your expenses are considered a capital contribution to the business. When you pay yourself back you will not have to do it as a loan. You may simply either: 1) issue yourself a documented reimbursement by making a detailed list of what you are being reimbursed for and include the receipts in your records OR 2) you may just pay yourself a distribution at any point as a draw from the capital account.

Either way you are not commingling funds; you just have to be sure to document that the contribution was made to the business, and/if you take a draw for the amount contributed you document it correctly by paying yourself with a check from the business.

-Steven the Tax Guy

Your guide to IRS laws, rules, and regulations.

Thanks Steven for sharing your expertise with us once again....

Is it okay to just document these start up cost as a contribution in my corporate kit, or do I actually need to write a check and reimburse myself to be safe? Thanks.

Bienes,

You may do either one; however, be sure to keep the receipts together in your corporate records as a capital contribution just as thought you contributed cash to the company.

-Steven the Tax Guy

Your guide to IRS Laws, Rules and Regulations

Originally posted by Steven Hamilton II:
Bienes,

You may do either one; however, be sure to keep the receipts together in your corporate records as a capital contribution just as thought you contributed cash to the company.

-Steven the Tax Guy

Your guide to IRS Laws, Rules and Regulations

great--thanks again!

I have been researching this issue and my research seems to say that startup costs are tax deductible even if made personally before the business started.  Wouldn't it make more sense to classify this as an expense than just a reimbursement?  Couldn't the company reimburse yourself for the amounts expended, and then deduct that reimbursement as a business expense?