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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4326
Experience:  35 years tax experience, including four years at a Big 4 firm.
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i am in an LLC with 2 members set up this year...a new business.

Customer Question

i am in an LLC with 2 members set up this year...a new business. I have travel, supply and advertising expenses that I had to pay out of pocket personally because the business could not afford the expense. where/how do I record those expenses? I also borrowed money from my 401k to fund my part and paying interest @ 8% back to my 401 k? where do I record that expense? thanks
Submitted: 5 years ago.
Category: Tax
Expert:  PDtax replied 5 years ago.

PDtax :

welcome to just answer.

JACUSTOMER-25ez1jx8- :

hello

PDtax :

it sounds like you are doing the bookkeeping for the business. there are two things you should clean up now, so the beeookkeeping and future go well.

PDtax :

If you have paid personally for business expenses, I would execute a note payable by the LLC that records the amount you loaned. Then, when the LLC can repay the $, payments will go toward the loan balance.

JACUSTOMER-25ez1jx8- :

no have a bookkeeper for business, but trying to make sure I include these somewhere on my return when I get my schedule k ....the bookkeeper is not aware of these expenses....

JACUSTOMER-25ez1jx8- :

looks like business may fail...want to deduct all I can now...

JACUSTOMER-25ez1jx8- :

most of this is travel back and forth to business location in new mexico from texas

PDtax :

Secondly, if you borrowed money to make your LLC contribution, that's capital and you alone would be responsible for the interest. If it is indeed a loan, you should again execute anote, with interrest, from the LLC to you. Then, interest and principal repayments could be easily recorded.

JACUSTOMER-25ez1jx8- :

you are correct...it is capital.....but would that not be investment interest expense?

JACUSTOMER-25ez1jx8- :

for me personally?

PDtax :

the LLC can't repay your loan if you made it as capital contribution.

PDtax :

The investment interest expense is margin interest or similar. It does not include money you borrowed to make your LLC contribution.

JACUSTOMER-25ez1jx8- :

correct...I personally borrowed money from my 401 k to make my capital contribution....

JACUSTOMER-25ez1jx8- :

ok so that interest is not deductible....

JACUSTOMER-25ez1jx8- :

what about the other travel and supply expense?

PDtax :

your loan will be deductible as a business bad debt if you take some steps. The travel and supply expense will be a deduction of the LLC, and you'll get a piece of that too.

PDtax :

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