topic Made a mistake. Cash withdrawn from business checking. Help. in Business & farm

Made a mistake. Cash withdrawn from business checking. Help.

wmmuller92 — Tue, 14 Jan 2020 19:18:10 GMT

Hello! I recently began my business and filed as an LLC at the end of November 2019. At that time I received what I've realized to be some pretty atrocious tax advise regarding my business checking account and how I pay myself. This is a single person LLC and to my understanding will be filed as an S corp if that is relevant. Basically I was told that there was no concern with withdrawing cash from the business checking account and I now know this is a huge no no, a big red flag to the IRS, and could destroy my LLC protection. I did so twice, one time for $40 and another time for $80. This felt very fishy and I began researching more about the IRS' outlook for records that are maintained. Again I now know this is a terrible practice. Now I am worried about how to account for these two ATM withdrawals in my accounting. I'm also now questioning if I know how to pay myself from my business at all. My research says that I simply need to transfer money from my business checking into a personal checking so that there is a paper trail that appears as a payment to myself essentially. Is this correct? And any advice regarding the ATM withdrawals is greatly appreciated. Thank you in advance!

Re: Made a mistake. Cash withdrawn from business checking. Help.

Critter — Tue, 14 Jan 2020 22:21:37 GMT

I highly recommend you seek local professional advice since you are not even sure if you got the EIN as an S-corp or not. And taking draws of less than $120 is nothing to be worried about. The person you talk to should explain the difference between a single member LLC and a corporation along with all the pros/cons of doing either of them.

Re: Made a mistake. Cash withdrawn from business checking. Help.

wmmuller92 — Tue, 14 Jan 2020 23:15:14 GMT

Thank you for your response. I know that I did not get an S corp, my EIN is an LLC. It was just my understanding that when it came to filing taxes because it is a single person LLC that it is treated as an S corp.

Re: Made a mistake. Cash withdrawn from business checking. Help.

VolvoGirl — Tue, 14 Jan 2020 23:22:55 GMT

It matters a lot if you elected your Single Member LLC to be a S corp. It either is or isn't an S corp. If it is not a S corp it it a disregarded entity and you file it on Schedule C in your personal tax return.

Re: Made a mistake. Cash withdrawn from business checking. Help.

VolvoGirl — Tue, 14 Jan 2020 23:35:05 GMT

This first year you better go to an accountant and get your taxes setup and done right. And to understand what you have and need to do.

Re: Made a mistake. Cash withdrawn from business checking. Help.

Rick19744 — Wed, 15 Jan 2020 01:19:37 GMT

I agree with @Critter that for the amount of $$ we are talking about, don't lose sleep.

Based on your facts and questions, I also agree it would be good to get some professional tax advice for your initial year so you get started on the right foot.

Some follow-up comments:

As noted, there is a difference between a single member LLC that is treated as a disregarded entity and a single member LLC that elected to be taxed as an S corp.
In order to be treated as an S corp, you would have needed to make a specific election and you would have received confirmation back from the IRS that they accept your election to be taxed as an S corp.
If you have not elected to be taxed as an S corp, you are completely okay, but still advise that you get some professional advice on how to move forward and understand best practices for the type of entity you are using

Re: Made a mistake. Cash withdrawn from business checking. Help.

wmmuller92 — Wed, 15 Jan 2020 04:05:28 GMT

@VolvoGirl and @Rick19744 Thank you for your responses, I appreciate your insight. That all makes more sense now. I did not elect to be an S corp. I will definitely be using a professional to file my taxes and will reach out to one regarding best practices.

Re: Made a mistake. Cash withdrawn from business checking. Help.

Rick19744 — Wed, 15 Jan 2020 16:26:13 GMT

You are welcome.