Moving capital/profit from private Investor to LLC

3 Replies

How is capital/profit moved to and from an investor to a business? Person X wants to invest in Flipping LLC. Can they simply wire 100k to the business account?

Can the business account wire 110k to person X when the project is over? Does person X need a legal structure? Are there tax or reporting issues with transferring large sums of money between an investor and a business?

Thank you!

Person X wants to invest in Flipping LLC. Can they simply wire 100k to the business account?

Generally yes.

Can the business account wire 110k to person X when the project is over?

Generally yes.

Does person X need a legal structure?

There are both legal and tax facets here. Person X should consult their own, independent advisors.  You as GP/managing member should not be advising on this matter.

Are there tax or reporting issues with transferring large sums of money between an investor and a business?

Maybe.  Distribution in excess of basis, debt financed distribution, repayment of reduced debt basis (if S Corp) are some possibilities that come to mind.

This isn't something that you can or should DIY.  Kind of like open heart surgery.  It's advisable to retain a professional.

Originally posted by @Lalainya Rawlings :

How is capital/profit moved to and from an investor to a business? Person X wants to invest in Flipping LLC. Can they simply wire 100k to the business account?

Can the business account wire 110k to person X when the project is over? Does person X need a legal structure? Are there tax or reporting issues with transferring large sums of money between an investor and a business?

Thank you!

Yes, you have basically created a partnership and you need to file a tax return. The K-1 generated from the partnership will report the income, contribution, distribution, and all tax-related matters. 

Money can be moved around as much as you want, you just need to book it correctly in your book and report it correctly in your tax return.