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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 14435
Experience:  15years with H & R Block. Divisional leader, Instructor
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Hello, I run a llc computer consulting business in Virginia.

This answer was rated:

Hello,

I run a llc computer consulting business in Virginia. My girlfriend and I are starting a dog walking business on the side. I own the majority of the dog walking business. I want my llc to fund the dog walking LLC (also in virginia) with say 15000 dollars in startup costs (mainly insurance and a small car to use in the business exclusively)

So my question is would this funding be deductable from my computer LLC gross income.

Thanks
Doug

Robin D. :

Hello and thank you for using Just Answer,
To be ductable as an expense, the amount needs to be associated with the business. The new business if not a part of the LLC you already have could not be used as a direct expense from the LLC. You would however, be allowed to use the start up costs for the new business and that amount would be passed to you which would be used for your own taxes.

In short, the costs would not subtract directly from the income of the LLC but the losses on the start up would be shown on your rerun as a partner of this new business and would be allowed to subtract from your income.
I am thinking that you as a sole member of the LLC are filing a Schedule C. All your net income is shown on your 1040 so if you are a partner in this new business your losses form it can be used to reduce your income tax but not any self employment tax form your LLC income for you.

Robin D. :

the costs will be beneficial but not in a direct manner.

Robin D. :

I hope that information is clear but please let me know if you need me to state it in a different way.

Robin D. :

My goal is to give you excellent service. If you are satisfied, please rate me. If you have follow-up questions on this same topic, use the reply box below. To start a new conversation with me on a new topic request me again.

Customer:

Hi Robin, - thanks - one small follow up- to clarify - if say I fund the new business which I am a partner in - with 15000 of my personal money, then if we dont make but say 5000 dollars year one - would that mean a 10000 dollar lose to report on my schedule c taxes?

Robin D. :

Not on the Schedule C of your computer business but the losses from the partnership would be passed to you and allowed to subtract from your income for income tax purposes. Did you 2 register as a partnership for the new business?

Robin D. :

Never mind I see you say it is an LLC. Specifically, a domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation.

Robin D. :

Your new business will need to issue K1s to each of you.

Customer:

yes as an llc - so if our articles of incorporation state I own 60% and she owes 40% but I made cash contribution of 15000 - and we only made 5000 - can i deduct the 10000 form my personal taxes - since I made contribution.

Robin D. :

Your portion of loss or profit will show on the K1

Customer:

ok quick definition of k1 please?

Robin D. :

A K1 is the form that the partnership issues to all partners and the amounts for income and losses aare shown based on the parner's % of ownership

Customer:

ok, so i want to get best tax break, then I should own vast majority of business

Robin D. :

Yes

Robin D. :

Here is a K1

Robin D. :

Everything passes through to the partners

Customer:

ok thanks - I'm happy with the answer.

Robin D. :

Your positive rating is always thanks enough.

Robin D. and other Tax Specialists are ready to help you