We started a business this year and received a starting capital from friends and family. Is this money taxable even though no profits are recorded yet?

[Critter-3 · Accepted solution]

Loans or gifts from friends/family is NOT income for the business and should not be reported as such.  Please seek local professional assistance to be educated on your situation and get instruction on keeping your books. 

[Carl]

The term *WE* started a business indicates your business type is a multi-member LLC, or it could be an S-Corp or C-Corp. Maybe just a partnership?

You really should seek professional help in your first year so that you set things up correctly, based on the type of business you've set up and what it is your business does to make money. This is especially true if your state taxes personal income. Overall, you'll find the cost of professional help in that first year to be a pittance, in comparison to the potential fines, penalties and back taxes you could owe if you do things wrong. If after that first year you want to tackle the book keeping and taxes yourself, then fine. But doing it right with absolute perfection in that first year is not an option. It's a must. I've seen my fair share of business go under after the first year because they didn't do things right. Please don't end up like that.