Tax implications of an angel investment into my LLC

[Zachary Thompson]

I have a single member LLC (sole proprietor) and I'm wondering if I must pay taxes on an angel investment? I intend on withdrawing most if not all of the initial investment. Thanks!

[Matt Devincenzo]

The difficulty is you're using conflicting terminology. If someone 'invests' that implies funds provided for a business purpose. But if you use those funds for 'personal' use, then there is no business purpose. So if you deposit these funds, withdraw them and then go buy a boat for yourself you have a very different tax position than if you deposit these funds and go buy a rental property.

If these funds are truly for a personal use, then the person giving you the funds isn't 'investing' they're either loaning you money or they are gifting you funds...only you can answer that question using the correct terminology for what is being done.