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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16547
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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LLC with $45,000 at the end of the year, paid taxes on it,

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LLC with $45,000 at the end of the year, paid taxes on it, and keep it in the bank for expenses. How do I treat that money for the following year. Do I make it like a deposit and pay tax on it again or make it like a loan to the business from the members.

Megan C :

Thank you for your question, my name is XXXXX XXXXX I would like to help you today

Megan C :

How are you doing?

Megan C :

The money that you have in the company is simply reinvested. You would not make this revenue and pay tax again.

Megan C :

You do not have to make it a loan, either

Megan C :

That amount is credited to your Retained Earnings account, and increases your basis in the company

Megan C :

The following year you can take draws from it (draws are tax free - you only pay tax on the current year income) or leave it in the business again

Megan C :

But, there's no need to include this as income or include it as a loan

Megan C :

Do you have any questions about this? If so, please reply below

Megan C :

If not, please rate me positive so that I may receive credit for assisting you today
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Customer:

I am doing fine, Thanks for asking, Hope you are doing well also. How do I handle the balance sheet for the next year? If I don't include it as income then my balance at the end of the next year will be a neg. $45K.

Megan C :

It's sitting in retained earnings

Megan C :

So, when you close out your revenue and expense accounts it goes to retained earnings on your balance sheet

Customer:

Ok Thanks,

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