How to Record / Report Tax a loan from my LLC to a...
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Level 1

How to Record / Report Tax a loan from my LLC to an individual

I have an LLC that is providing a loan to an individual worth $25,000 with 9% interest rate.


I origionally had placed $4,000 into the LLC to start the LLC, and have just transfered $25,000 from my own account to fund the LLC for the loan (which will be going to that individual as the loan).


How should I report the 25k I put into the business? How will this be taxed?  Will I pay tax on each payment coming to the LLC as a whole? Will only the interest on the loan be taxed? If I withdrawl any of the principal at a later time from my LLC to myself, will I have to pay any tax on this? I did not want this to be a personal loan from me to the individual, but would a personal loan have made more sense?


Any advice on this scenario would be very helpful.

2 Replies
Level 15

How to Record / Report Tax a loan from my LLC to an individual

Seeding your business with personal money is NOT income so it is NOT reported on and INCOME tax return.

As the loan is paid back the interest paid will be reported on the return Sch B   NOT  on the Sch C if this is a single member LLC.  In fact I don't know why the "business" is making the loan at all unless your business is in the business of money loaning.



What you need to do is keep good bookkeeping records for your business ... if you don't know how then either hire help or educate yourself. 

Level 11

How to Record / Report Tax a loan from my LLC to an individual

Is this a Single Member LLC that has NOT made an election to be taxed as a corporation?


If so, it is a "disregarded" entity for income tax purposes.  In other words, the LLC is ignored and things are treated as if everything was done by you in your personal name.  So it effectively is a personal loan (at least for income tax purposes).


As Critter pointed out, unless this is a business that is in the business of lending money, the interest you receive is treated as any other interest that you receive (such as from your personal bank account).


The  money that you put into the LLC bank account has no bearing on anything.  It is just moving money from one of your bank accounts to another.  Doing that could help preserve the legal protection that the LLC may give, but has no effect for income tax purposes.



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