I have a question regarding a husband/wife LLC that is taxed as a sole proprietorship (pass through). Are there any tax implications of moving a personal bank account under the LLC? I think the answer is "no", but I was wondering if anyone could confirm that. Thanks in advance!

Moving assets into an LLC is not a taxable event itself. If it is truly a personal checking account I would be worried that exposes the LLC assets to creditors.

Thanks. No, it is a savings account and would be put under the LLC's EIN. Everything expense-wise still separated like it's supposed to be. Just additional funding for the LLC is the intent.

Actually, I should have been more clear. I meant to say transferring funds out of a personal account and into an existing LLC account.

Bonfire97 said:

---

Actually, I should have been more clear. I meant to say transferring funds out of a personal account and into an existing LLC account.

---

That would just be a capital contribution. No tax consequences whatsoever.

30wedge said:

---

Bonfire97 said:

---

Actually, I should have been more clear. I meant to say transferring funds out of a personal account and into an existing LLC account.

---

That would just be a capital contribution. No tax consequences whatsoever.

---

Agree

Agree. But as mentioned above by another you ideally want to minimize assets in the LLC unless they are necessary to support the ongoing ops of the business. Keeping financing activity (and checking, etc) of the LLC separate from personal is key to maintain the protections of the LLC.

Also, taking regular distributions of profits (whether through salary or otherwise) establishes a good record should you ever need to show that such distributions were normal and ordinary and not done to avoid obligations / creditors of the LLC.

Thanks all!

Bonfire97 said:

---

Actually, I should have been more clear. I meant to say transferring funds out of a personal account and into an existing LLC account.

---

As far as the IRS is concerned, your LLC is a disregarded entity. Thats an official term and searching using that term helped us clear up some questions we had with our LLC. Think of your standard issue LLC as a sole proprietorship that has specific accounting practices to limit your liability. The IRS doesn't care about the number in the bank account specifically. They just want your profits to show up on your married taxes filed under a Schedule C.

Now to protect your liability you do care about the account. If you transfer funds into the LLC from an individual account, all you've done is make a capital contribution. Your LLC's books will reflect a debt to you and your wife. You don't owe any extra taxes because you haven't generate a profit, you've generated a debt.

To 'pay' yourselves out of an LLC is a distribution. You can take cash out of the LLC's account anytime and for any amount you have the cash for.

flown-the-coop said:

---

Agree. But as mentioned above by another you ideally want to minimize assets in the LLC unless they are necessary to support the ongoing ops of the business. Keeping financing activity (and checking, etc) of the LLC separate from personal is key to maintain the protections of the LLC.

Also, taking regular distributions of profits (whether through salary or otherwise) establishes a good record should you ever need to show that such distributions were normal and ordinary and not done to avoid obligations / creditors of the LLC.

---

Except that an LLC member should not take a salary if it is a disregarded entity (single member LLC default filing as a sole proprietorship).

30wedge said:

---

flown-the-coop said:

---

Agree. But as mentioned above by another you ideally want to minimize assets in the LLC unless they are necessary to support the ongoing ops of the business. Keeping financing activity (and checking, etc) of the LLC separate from personal is key to maintain the protections of the LLC.

Also, taking regular distributions of profits (whether through salary or otherwise) establishes a good record should you ever need to show that such distributions were normal and ordinary and not done to avoid obligations / creditors of the LLC.

---

Except that an LLC member should not take a salary if it is a disregarded entity (single member LLC default filing as a sole proprietorship).

---

Are you saying you 'shouldn't' take a salary or that you can't? I thought an LLC owner can't take a salary since a salary is narrowly defined as a repeating defined benefit for employees (set pay every two weeks). And you're an owner, not an employee.

I thought an LLC can hand out disbursements on a regular basis, but it's not a considered a salary.

one MEEN Ag said:

---

30wedge said:

---

flown-the-coop said:

---

Agree. But as mentioned above by another you ideally want to minimize assets in the LLC unless they are necessary to support the ongoing ops of the business. Keeping financing activity (and checking, etc) of the LLC separate from personal is key to maintain the protections of the LLC.

Also, taking regular distributions of profits (whether through salary or otherwise) establishes a good record should you ever need to show that such distributions were normal and ordinary and not done to avoid obligations / creditors of the LLC.

---

Except that an LLC member should not take a salary if it is a disregarded entity (single member LLC default filing as a sole proprietorship).

---

Are you saying you 'shouldn't' take a salary or that you can't? I thought an LLC owner can't take a salary since a salary is narrowly defined as a repeating defined benefit for employees (set pay every two weeks). And you're an owner, not an employee.

I thought an LLC can hand out disbursements on a regular basis, but it's not a considered a salary.

---

A sole proprietor (whether straight Schedule C or Schedule C due to a single member LLC disregarded entity) is not eligible to take a salary (W-2 income). Neither is a partner in a partnership.

An LLC can, in fact, make disbursements, treated as a draw and you are correct, it is not considered a salary. Not deductible by the LLC nor income to the LLC member.

Quote:

---

Quote:

---

Quote:

---

Quote:

---

+ 1 more quotes (click to expand)

---

30wedge said:
Except that an LLC member should not take a salary if it is a disregarded entity (single member LLC default filing as a sole proprietorship).

---

one MEEN Ag said:


Are you saying you 'shouldn't' take a salary or that you can't? I thought an LLC owner can't take a salary since a salary is narrowly defined as a repeating defined benefit for employees (set pay every two weeks). And you're an owner, not an employee.

I thought an LLC can hand out disbursements on a regular basis, but it's not a considered a salary.

---

A sole proprietor (whether straight Schedule C or Schedule C due to a single member LLC disregarded entity) is not eligible to take a salary (W-2 income). Neither is a partner in a partnership.

An LLC can, in fact, make disbursements, treated as a draw and you are correct, it is not considered a salary. Not deductible by the LLC nor income to the LLC member.

---

To add:

There is also no benefit to a sole proprietor paying themselves a salary (W2 wages). In fact, it can limit some benefits such as certain retirement plans.

I think it is possible we are getting mixed up on terms here. You have to remember, us accountants use terms like "salary" in a specific way while non-accountants tend to use it in a more general way.