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I have a newly formed LLC in California which I did through Legal Zoom. I understand I need to be careful with cash flow (with respect to where it comes from and goes). I am also in the process of establishing a bank account with BofA. Obviously a company doesn't just form with cash in the bank so I, as the sole member, need to place an initial 'investment' into the account. Do I simply write a check from my personal account to the company account? I would prefer to do this just once but I have a feeling I may have to infuse cash a few times. I DO NOT intend for cash to go the other way (until money is coming in and I can pay myself).

Also, I purchased a $9,000 piece of machinery prior to forming the LLC (with the intent to use it for the company). The machine has not yet been delivered but should arrive soon. I have all the documents for that purchase. I had them use the company name on the invoice but I paid with my personal funds. Is this a problem? Do I need to do anything other than retain all the documents related to the purchase?

Please point out any flaws in my thinking and slap me around a bit. I would have thought this might be a common question but I was unable to find a similar question through search.

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3 Answers

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What you have done is perfectly fine, simply retain the appropriate receipts etc for your records. The other expense which you probably have is the money you paid to Legal Zoom.

As for writing a check from your personal account to the company account, this is standard practice, and yes it is perfectly OK to do this multiple times if you need additional money for the business. Once again, simply retain the appropriate records.

Going forward, one would generally purchase a large piece of equipment with funds from the business account. There may be times when you need to make small purchases for cash however. For example your neighbor has a tag (lawn) sale and you buy a used file cabinet for $20 cash. In such cases it is perfectly fine to have the business reimburse you by filing an expense report just like you would do if you were working for a large company.

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It's fine to lend the business money (with the expectation of getting paid back in the future); just keep records of the transfers so you can show the repayment as a repayment rather than a distribution of profits.

The $9,000 piece of machinery which was purchased prior to the business would be considered a Start Up cost; you may need to amortize this over 180 months rather than simply deducting the cost. See this page on the IRS website for a discussion of handling startup costs.

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up vote 1 down vote

Sounds like you may paid for your LLC ownership with "services rendered" vs in cash. Not a big deal but you should talk to your accountant because this is akin to a income and thus you may have to pay taxes on it.

That being said you can open a Promissory Note to account for the $9000 and machine purchase. You can keep the note open and just add future loans and business expenses as they happen. This way, when you are ready to pay yourself back (because the company has money from operations) everything will be documents and a legal loan in place.

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