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You are here: Experts > Business > Corporate Law > Tax Law (Questions About Taxes) > proper accounting for startup costs for LLC?
Expert: John Kirk, CPA
Date: 8/29/2008
Subject: proper accounting for startup costs for LLC?
Question
Suppose that one or more people incur startup costs for an LLC. Then they register the LLC and open a bank account, and put in money proportional to their ownership of the LLC.
a) Should the newly formed LLC then reimburse the owners from its new bank account? Should it be recorded in the books under a "startup account"? What if the bank account does not have enough money to pay? Should it be treated as loans?
b) If it is a single person LLC, is actual reimbursement (e.g., in the form of a check from the LLC bank account) not necessary? How should it be recorded in the books? And if the owner decides to waits for revenues to come in to pay back the startup costs, how should it be recorded?
thanks
Dan
Answer
Any start up cost paid by the members before the formal organization of the LLC should be booked as loans from the members. These should be paid back with interest. Record these costs as Organizational Expenses.
If it is a single member LLC, record them as capital contributions.
Start up cost are deductible upto $5,000, and then amortized over 180 months.
John Kirk, CPA
www.johnkirkcpa.com
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