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For an LLC in the first year, the Owner invests only $3,500…

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For an LLC in...

For an LLC in the first year, the Owner invests only $3,500 and withdraws $28,000 to use as compensation for his labor. How should these withdrawals be reported on the financial statements?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

We have a client who started an LLC and in the first year invested $3,350.00 and during the withdrew $28,078.00 for compensation for his labor. How should these withdrawals be accounted for and appear on the financial statements?

Accountant's Assistant: Excellent. The Accountant can walk you through setting up an LLC or see if that's the best choice for what you want. Is there anything else the Accountant should be aware of?

I do not need assistance in setting up the LLC. I'm only asking how should the withdrawals made by the owner be accounted for?

Submitted: 3 months ago.Category: Tax
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Answered in 4 minutes by:
3/25/2018
Tax Professional: Carter McBride, Certified Public Accountant (CPA) replied 3 months ago
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,269
Experience: Adjunct Professor
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Hey! I'm Carter, I'm a CPA and can help you out with this.

You can book these as a withdraw/distribution in the equity section of the balance sheet if it is a disregarded entity that flows to the Schedule C.

If its a partnership, you probably want to classify them as guaranteed payments since they were in exchange for compensation.

If its an S Corp, he should have issued himself a W-2 and the amounts would be booked as officer compensation.

Let me know if you need anything else. If not, please leave a rating. Thanks!

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Tax Professional: Carter McBride, Certified Public Accountant (CPA) replied 3 months ago

Hey! Just wanted to follow up to see if you needed anything else. If not, please leave a rating so I can get credit for helping you out. Thanks!

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