Author Topic: Cash In/Out of our LLC  (Read 396 times)

Louisville

  • Bristles
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  • Posts: 477
Cash In/Out of our LLC
« on: September 26, 2018, 11:59:20 AM »
My wife and I bought an established business in April. Actually, the LLC is all in her name. We paid $150k: $30k out of pocket and took $120k loan for 3% from Bank of Dad. During the first month, we transferred over another $5k to the LLC’s bank account for a cash cushion.
So, we have $35k in what I call “owner equity” in the LLC. Correct me if I’m using the wrong term for this. Is there any risk in letting this be on the books of the LLC? Should we pay it back to ourselves ASAP? Or does it matter?
Any input welcome. Thanks.
« Last Edit: September 26, 2018, 12:27:51 PM by Louisville »

CareCPA

  • Bristles
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  • Posts: 310
  • Location: Northcentral PA
    • Care CPA - Tax, Accounting and Payroll
Re: Cash In/Out of our LLC
« Reply #1 on: September 27, 2018, 08:43:25 AM »
Generally, you can contribute and distribute cash from the LLC at any point in time (subject to any restrictions in your Operating/Partnership Agreement). If you're pulling cash out, just make sure you have basis in the businesses.
It becomes more difficult if you elect to be taxed as an S Corp, but not substantially so if it's single owner.

There's no harm in leaving this on the books, and actually gives you basis to take losses if they occur.

jpdx

  • Stubble
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  • Posts: 193
Re: Cash In/Out of our LLC
« Reply #2 on: October 06, 2018, 12:12:17 AM »
I believe the term for transferring personal funds to the LLC is "capital contribution." This can be money or property. And when you transfer funds in the other direction it's known as a "distribution" or "member draw."