Expert: Arthur Naman - 10/4/2010

Question
We are sole owners of a corporation. We have deposited our own money into the corporate account to pay bills. How is it best to show in quickbooks. Is this better to show as partner contribution or as a loan that the corporation will pay back. Is there a tax advantage with one or the other.  

Answer
First, since this is a corporation, please do not show any partner contribution. If the two (or more) of you co-own the corporation, you are *not* partners, per se. "Partners" is a term solely applicable to a partnership.

When incorporating, there is normally a number of shares issued and outstanding at a specific amount per share. (For example, 1,000 shares at $1.00 per share.) That should be setup in an account for stock as follows  cash <debit> stock <credit>. The stock account needs to be shown; since this is a corporation, the absence of a stock account will raise red flags to anyone reviewing the books.

If any amount is put into the corporation over and above the initial value of the stock, then it can be shown as "additional paid in capital" or "shareholder loan".  Normally the extra is shown as shareholder loan so that it can be paid back with no tax consequences.

I recommend you find someone in your locale to assist with your continuing accounting and tax questions.