My LLC finally made some money! Now how do I get $ and pay taxes?

Question

Hello,

I finally sold my first deal, but it did not to go as well as planned. My LLC did not make any money for its first whole year and all the finances came from me loaning it.

I know for a fact I probably did not keep my books properly as it was my first year, I had no clue what I was doing and I got down for a while, putting off record keeping because the property was just putting me in a hole financially.

The proceeds from the sale are about $38,000 and the money owed to me in loans is at least $2,000, maybe more. I need to be able to get more out then that as I have a lot of personal bills to pay but don't want to be double taxed for an income.

There are some expenses I think I was supposed to loan the cash to the LLC so the entity could make the purchase but I had no cash and had to put it on my credit personally and I don't know how to reimburse my self.

Also, I have had to be hospitalized 3 times without insurance and am not sure how much I can reimburse for or how to handle that. At the same time I want to keep at least $30,000 in to reinvest in a cash flowing property to help ease the debts incurred. I feel pretty clueless as to what to do, I had lawyers open the LLCs and I don't feel I was very well educated on how to run the entity.

Do I need a lawyer or just a CPA or what?  Thank you so much for reading my post.

Lee

Robert Leonard · Answer

Well Account Closed, it sounds kind of messy, but unless you elected to have your LLC taxed as an S Corp, ( you would know if you did that) your LLC is a "pass through entity" and all of the income and expenses pass through to you individually on your tax filing.  It can cause problems with your asset protection when you don't keep things separate between what's personal and your business.  But otherwise, on the tax side of things, it's pretty inconsequential.  You can still expense  the real expenses related to the property/deal to the property to reduce your tax bill.

Get your tax and asset protection advice from your own professional advisors, but generally speaking, you are doing business with an LLC, but effectively negating the LLC and doing things like a sole proprietor.  That means if something goes wrong, and you get sued, you have an asset protection problem.  That's why it's important that you get your business in order and keep your business and personal matters separate.

Whether or not you can keep 30k or some other portion of the proceeds of your deal is a matter of how it fits in your overall income picture for the year.  You could have 38k proceeds from the sale and still have loss money on the deal.  Yes, you need a CPA to help you figure that out.  A lawyer will help you understand how to keep your LLC activities separate from your personal activities to maintain your asset protection.

Troy Sheets · Answer

Lee, I can recommend a good one that is also an investor. PM me if you're interested.

Account Closed · Answer

Does anyone have any Philadelphia recommendations for a CPA? I canceled my membership with the lawyers that originally opened my LLCs because they are in Las Vegas and I didn't feel they were pro forming well I. E.  Felt uneducated and clueless. (Not that the membership included a CPA but it did include unlimited email and by appointment phone advice) I want someone I can meet with face to face with experience and patience enough to   Handle my situation.

Account Closed · Answer

@Robert Leonard it is messy, I originally opened an LLC in Hawaii only to find out I could not purchase the Philadelphia property I ended up buying with that LLC so I had to open one in PA. So I have two. I am pretty sure one is taxed like an S corp and the other like a C corp. they set it up so that the Hawaii one is the official manager of the Pennsylvania one. I was supposed to loan all the money to the Hawaii one and have it loan that money to the Pennsylvania one but for time and know how I just loaned directly to the Pennsylvania one. @Way

@Wayne Brooks  that is why I think I need to be reimbursed as I was under the impression that the LLC was a separate entity from my personal finances.

Account Closed · Answer

Also, by the way I am in Philadelphia, Pennsylvania now and so is the LLC I am referring to, incase anyone has any local suggestions. Thanks again for your time.

Lee

Cameron Skinner · Answer

I'm an accountant, lawyers will sometimes set up entity structures for liability reasons with no regard to the tax implications.  If you really did set up a c corp you have some double taxation issues to deal with and your loan will fall into the "related parties" rules.  You really need a good tax professional in your area, try to find one who owns investment property themselves.

Marc Dupuis · Answer

Lee,

entity structures and taxation kind of go hand in hand, when setting these up you want to have a strategy and make sure both your CPA and legal counsel look at what your proposing. If  you do it properly (and I can't stress this enough SET UP PROPERLY) you should be able to shelter the income that you made during the year from any income tax, and IF you held the property as an investment there is also a way of sheltering the capital gains from taxes as well, but it has to be set up properly.

Wayne Brooks · Answer

If your LLC is taxed as an S corp, same as above.

Wayne Brooks · Answer

Yes you need a CPA to organize, and understand the issues.  Any "profit" passes thru to you anyway whether or not you take it out and put it in your personal account, so "taking it out" has no bearing on the taxes you owe.  There is no "double taxation" on profits you take out.

My LLC finally made some money! Now how do I get $ and pay taxes?

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