Can I lend my LLC money?

Question

I ambuying a house through my LLC with mostly personal money.  Can i buy a house, pay 20% from the LLC account and then make a loan to the LLC for the balance?  Is that necessary?  I try to keep personal and company money very separate.

Alan Rohrer · Answer

@Greg Smith

Assuming you are the sole owner of the LLC, the IRS sees this as a "disregarded entity" - meaning it basically still sees it as a sole proprietor. Note the the law sees it different (they see an single member LLC as a different entity and hence you get asset protection...if everything is set up right).

However, the IRS disregards the single member LLC for tax purposes. Where this comes into your situation, is that the IRS just sees you giving money to yourself- so there's no "loan" taking place.

However, if you were to draft loan documents with a payment plan and interest, this would in fact be considered a loan. The interest would be deductible from rental profits, but would be taxed as interest to you.

You should speak with an accountant who can get the full picture of your situation and help you decide what the best option is.

I will say, that most people here on BiggerPockets, including myself, recommend keeping things as simple as possible starting out.

Best of luck!

Greg Smith · Answer

@Chris Seveney

@Alan Rohrer

Thank for the advice.  Sounds like I might be creating unnecessary complications / overthinking things