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  1. #1
    Join Date
    Oct 2007

    Capital contribution deductions

    What is the name of your state? - Virginia

    I have been operating a sole proprietorship taking income for a number of years, and just created a single-member LLC to protect my personal assets as my business grows. I will also be electing to file my LLC taxes as a corporation so that i receive the lower tax rate versus passing it through to my personal taxes (at a higher rate)...

    I am aware that any capital contributions i make to the company are tax deductible for the LLC. However, how do i treat these on my personal taxes?

    1) for example, the cost to incorporate was paid for by personal funds before the LLC existed. so can i deduct these costs on my personal tax return as a business expense?

    2) Also, I would like to take the remaining income I have from my sole proprietorship and combine it with new income from the LLC to purchase some computer equipment. Before my LLC, i would have been able to deduct the (section 179) business expense from my personal income.. However, if i contribute this income to the LLC, and then purchase the equipment through the LLC, would i be able to deduct the contribution as a business expense on my personal income? Would i then still be able to deduct the expense of the equipment from the LLC's income?

    3) what kind of paperwork/forms/documents would i need to use for all this stuff?


  2. #2
    Join Date
    Aug 2007
    With Capt'n Hook
    Because you are new to all of this, you would be best served by seeing a tax professional who is versed in small businesses.

  3. #3
    Join Date
    May 2004
    I sincerely agree with Ginny's advice. There are several things that you don't clearly understand (such as personal tax rates vs corporate tax rates as one example) and I believe that it would be in your best interest to have a sit down meeting with a tax professional who is well versed in small business.

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