 Determining
LLC income
Tax Talk by George
Saenz • Bankrate.com
 Dear
Tax Talk,
If the members of a limited liability company
(LLC) contribute money to the LLC for operating costs, is that considered
"income" for the LLC?
-- John
 Dear
John,
A limited liability company is automatically considered a partnership
for tax purposes unless it elects to be treated as a corporation. A contribution
of money by the members of an LLC is considered a contribution to capital of the
partnership and not income. The same is true for a contribution of money by shareholders
of a corporation.
Since the LLC needs these funds to pay operating
costs, the contribution will flow back to you as a tax deduction in the form of
a loss from the partnership. For example, suppose the LLC made $100,000 in sales
and incurred $120,000 in costs. If the partners contribute the $20,000 deficiency
and the partnership pays its bills the partnership will have an overall loss of
$20,000, which would be a deduction to the partners. Since
the Internal Revenue Service considers bank deposits as income unless you prove
otherwise, it's important that you keep good records to establish the contribution
to capital. For example, a copy of the partners canceled check would be good documentation. | 
