Hello,
I am a member of a recently established 2-member LLC. We are looking to purchase our first property using leverage. In order to qualify for more conventional loans, we will each purchase a property with the mortgage in one member's name. That way, we could each qualify for 4-5 loans.
What I learned, however, is that when an LLC has been in existence for less than 2 years, the purchase of the property by the individual cannot use funds from an LLC bank account. E.g. the check used to purchase the property must come from the individual's bank account.
My question is with regards to the accounting of these transactions. Member A and B have 50% equity in the LLC. Say the purchase requires $20k up front, to come from a personal bank account of Member A. He purchases the property and then deeds it to the LLC. How do we account for this in terms of the equity accounts of the LLC?
One potential way to handle this is for each of us to make capital contributions to the LLC, say $20k each. And then transfer $20k to Member A's personal account for the purchase of the property (must wait 60-90 days to become seasoned). How then would this be accounted for on our books? It shouldn't be classified as a draw since Member A's equity level should not change.
Thank you all,
John
