Partner loan to LLC

[jmj1015]

Partner 1 took personal loan and lent it to LLC. Partner 1 matches payment of Partner 2 for monthly payment but they are using personal loans , how should they report the payments to loan?

[Rick19744]

Need to be more specific on your facts and question.  Not real clear other than Partner 1 loaning $$ to the LLC.

[jmj1015]

Partner 1 took a personal loan of $4000 and contributed to LLC.  There are 3 partners in LLC. Only two partners (Partner 1 and 2) have agreed to make payments toward the loan (capital) that was contributed. But the payments are not coming from the LLC, they are using other sources of income not income from LLC to make the monthly payments. How should  the loan contributed should be reported , would it be loans from partner? And since payments are not being made directly from LLC partner distributions how should I proceed to report payments? Partner 1 and 2 did receive guaranteed payments from work that they performed? Should I use those payments as distribution toward Partner 1's capital?

[Critter]

You have a bookkeeping issue here not an income tax issue ... I highly recommend you seek local professional assistance to set up the books correctly and get specific help on your bookkeeping entries specific to your situation.

[Carl]

A partner does not "lend" money to a partnership they are a member of. Individual partners make capital contributions of their own money.

If one partner took out a loan and contributed 100% of the borrowed money to the partnership, then that one partner has several choices. They can treat it as their own personal capital contribution if they like.

It can also be treated as a loan taken out by the partnership *PROVIDED* that borrowed money is used 100% for the partnership operation. All those partners making payments on the loan from non-businses money would first make their share of the payment a capital contribution to the partnership. Then the partnership would write the one single check for each loan payment. That way, the partnership may be able to claim the interest on the loan as a deduction.

Later when the partnership has profit, the partners can start taking out their capital contributions with no tax consequences, since there capital contributions to the partnership were made with already taxed money.

[jmj1015]

Other than it being a bookkeeping problem so should I just report the contribution from that partner and not any of the payments that have been made?

[jmj1015]

Got it! Thank you Carl!