Paying personal debt with company checking

[Robert Glennon]

I'm working on getting all of my rentals transferred to my LLC and setup in Quickbooks. I'm using Nancy Neville's book: "QuickBooks for Landlords who hold & flip" which is a great help.

I have a few personal unsecured lines of credit that were used to purchase/rehab these homes. 3 questions:

1. Do you recommend paying those lines of credit directly out of business checking acct, OR making a draw to myself first and then paying the line of credit from my personal checking account?

2. How will doing one or the other affect me tax wise?

3. How will doing one or the other affect the balance sheet and profit/loss statements?

Unfortunately, I'm not at a place where I can refinance the lines of credit I to a business loan at this time.

What say the experts?

[Account Closed]

Hello Robert:

If you used personal funds to purchase a home and rehab it for business, then you can pay yourself back by making youself a Vendor, and linking that expense account to the property that you purchased and are rehabbing in the Fixed Asset Account in your Chart of Accounts. 

Let's say you added your first home you purchased with your personal funds.  You add this property as a fixed asset in your COA.

123 New Property Street (Fixed Asset) Chart of Accounts

If you are flipping this property you would add the expenses to rehab it as a fixed asset sub account of the property, so that the equity in the homes increases with each rehab job. 

If you don't plan to flip, then the rehab expenses would be just an expense account.  

Since the money was taken out of your personal checking account, you can pay yourself back by writing a check to yourself, or cash, and linking the purchase of the house and the rehab jobs to the property itself.  This will show that you are paying yourself back for this property and jobs.  

But as the above poster stated, keep your receipts, which I know you will, and keep them  in your business file. 

Nancy Neville